Friday, June 10, 2011

Gift Card

I enjoy giving gift cards, especially to those hard to shop for people on my list. I, like nearly everyone else, have at least one person on my shopping list that I either don’t know what to buy or I can’t find what I think they would like. When that happens I consider their likes and then purchase a gift card I think they will enjoy using.

For example, I give my restaurant loving friends gift cards to their favorite restaurants; gas station gift cards to my teenage nieces and nephews who drive; shopping mall gift cards to my daughter; and massage gift certificates to my sister-in-law because I know she loves getting massages.

Although gift cards are great and I buy them frequently, there are a few things to be aware of. The main thing is to make sure the recipient knows the gift card is like carrying cash and needs to be safeguarded in the same way cash is. For the most part, lost or stolen gift cards cannot be replaced.

Another thing to be aware of is hidden fees, well not really hidden fees, but fees detailed in very small print – that size “one” font that’s nearly impossible to read!

One charge that will be apparent right away is a possible upfront processing fee to defray the cost of producing and distributing the gift cards. Most companies try to avoid charging an upfront fee. But some, like my local mall charges a small fee to purchase a gift card. It’s nominal, $1.50 per card.

Some companies and stores charge a non-use or dormancy fee on their gift cards. If a card is not used for a specified period of time, a small amount is deducted from the value of the card every month. For example, $1 or $2 may be deducted from the balance of a gift card every month if that gift card is not used within six months of purchase.

Another type of charge some gift cards have is a balance fee. If a gift card has a balance on it after a certain amount of time, typically six months after purchase, a small fee is deducted each month. The fee is small, not usually more than $1.50 or $2. This is similar to a dormancy fee, but the difference with a balance fee is that even if the card was used within the first 6 months (or whatever time frame is specified) a fee will be assessed each month for still having a balance on it. This is to encourage people to use their gift cards in a reasonable amount of time and not leave them sitting on a shelf somewhere collecting dust.

If you purchase a gift card that has a balance or dormancy fee, try to purchase it as close to the time you are going to be giving it away as possible.

Also be aware that the gift card could have an expiration date. Most of the gift cards from large companies don’t have an expiration date or allow a lengthy amount of time before the card expires, such as five years. Shorter time periods to use gift cards and gift certificates, usually not less than 12 months but occasionally as little as 6 months, are more likely to be found with smaller companies and independent business owners.

I think it’s perfectly fine to give gift cards and gift certificates with an expiration date. Just make sure the recipient is aware of the expiration date. An expiration date shouldn’t cause you to not buy a gift card. After all, you don’t want people to hang on to the gift card and not use it.

And, remember that although gift cards may carry some fees, the majority of them will never be a problem if the card is used within six months, which most gift cards are. So feel free to give gift cards whenever you think it is an appropriate gift.

One interesting note: even though some gift cards have started adding fees to their gift cards such as dormancy fees, balance fees, or maintenance fees, some states are starting to pass legislation banning those fees as well as banning expiration dates. This is good news for consumers.

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