Gift-card gotchas

Last reviewed: December 2010

New federal rules for gift cards limit issuers’ ability to charge certain fees and impose expiration dates. Inactivity and service fees can be charged only if a card hasn’t been used for at least one year. But issuers still can charge fees to buy the cards, as they usually do for the bank-issued variety, those that bear a credit-card logo. For example, expect to pay $3 to $7 for an American Express gift card.

Issuers are not required to set aside gift-card proceeds to protect them from bankruptcy proceedings or to make them eligible for federal deposit insurance coverage. So if a retailer or financial institution that issues gift cards goes belly-up, the cards could become worthless.

Beyond that, many people never get around to spending their gift cards. A quarter of the people we surveyed in October 2009 who received a gift card the previous year said they hadn’t yet redeemed their almost year-old cards.

What to do

If you can’t decide what to buy, give cash or a check rather than a gift card. Cash never expires or loses its value due to bankruptcy, and it’s good anywhere. And if your check is never cashed, the money stays in your bank account.