Gift Cards And Inactivity Fees Hurt Consumers, Says Consumers Union
During the holiday season, gift cards are one of the most common gifts to change hands. Among consumers, gift cards have become more and more popular as a gift choice. However, gift cards may not be as “Christmas-y” as people think. Gift cards are still a business and gift card issuers will always be looking out for their profits first which is why, the rise in popularity of gift cards is accompanied with the rise of gift card inactivity fees.
Gift cards penalize card holders who do not redeem the value of their gift card within a specific time period. Oftentimes, it turns out that the recipient of the gift card is only able to use a fraction of the stated value of the gift card due to a number of hidden fees. The upcoming consumer friendly Credit CARD Act, does address the issue of gift cards. However, many feel that the measures that the new credit law takes is far too little. The new credit legislation will only limit charging inactivity fees on gift cards if it has been used in the last twelve months. If the gift card has not seen activity twelve months, then the card issuer gets to issue inactivity fees.
Due to the apparent weakness of the Credit CARD Act’s measures against gift card inactivity fees, nonprofit outfit, Consumer Union and a number of other consumer support outfits have written letters to the Federal reserve asking to expand the gift card rules of the Credit CARD Act of 2009 so as to provide full protection to consumers from unfair fees. They also asked the Fed to provide more consumer protection by putting a limit on the inactivity amount that is charged by gift card issuers. The limit would be that the inactivity fee would have to be equal to the actual cost that the card issuer incurs to maintain the card.
At the moment, a large number of consumers lose the actual value of their gift cards because they delay their redemption. Consumer Reports recently did a poll which showed that one fourth of those who received gift cards last holidays still have one card, at least, still unused. 11 percent of those who were surveyed carry multiple gift cards still unredeemed. In 2006, the total amount of gift cards unredeemed was around $8 billion, estimated.
Consumers Union has already told the Fed that it ought to follow what a few states are doing. In Washington, California and Oklahoma, gift card issuers are limited from charging inactivity fees when the balance on the gift card is $5 dollars or below. The aforementioned states also limits gift card issuers to only a $1 per month in fees.
