General Purpose Gift Cards: The Cost Outweigh The Benefits
With the holiday season fast approaching, a lot of American consumers are probably thinking about what to get their loved ones for the season. A gift option which has become quite popular among consumers are gift cards.
Gift cards are one of the easiest and most convenient gifts to give during the holiday season. For the giver, shopping for a gift is no longer a problem. For the receiver, it means that they can buy the items that they actually want. They may even postpone their purchase and wait for the item they want to become available or for a more opportune time to spend their holiday gift.
As great as gift cards sound, there is an ugly side to it for consumers. Gift cards may seem like great deals at the surface but if consumers were to examine the fine print, they would see that some gift cards come with several fees which would effectively subtract a large amount from the value of the gift card itself. The new Credit CARD Act does have some provisions for gift cards. However, it does not specifically address the fees that gift cards come with and they won’t probably be eliminated any time soon. It is best for consumers to first know what they are going into before they commit to giving the gift of gift cards.
Basically, there are two types of gift cards. One is the store gift cards and the other is the general purpose bank cards. General purpose bank cards usually carry regular credit card branding such as MasterCard, American Express or Visa. They can be used anywhere where credit cards are accepted, unlike store gift cards which can only be used in specific stores. However, general purpose bank cards are the ones that are loaded to the hilt with fees. They also cannot be reloaded and there is no protection provided so purchases using these cards cannot be contested and no “stop payment” service is available.
The fees that come with general purpose gift cards are decidedly nasty. The moment that this particular gift card is purchased, there is already an expiration date that starts ticking. For instance, Wells Fargo gift cards usually expire four years after purchase. Not only that but gift cards also have so-called dormancy fees. An example is the $2.50 deduction that Wells Fargo and Chase take from gift cards every month one year after their purchase. Unused cards could therefore be eventually depleted. Also, according to Washington, D.C. based Consumer Federation of America, some general purpose gift cards can see charges within six months from the day of purchase.
Gift cards are definitely financial traps waiting to happen. Consumers should do their research well before giving one as a gift or, as Consumer Union staff attorney Michelle Jun says, “Write a check or give cash – then you know there won’t be any fees”.
