As far as I am concerned, an appropriately selected gift card is the best present I can give (or receive). The recipient is almost always ecstatic (I emphasize appropriately selected again here) and when I am lucky enough to receive one, chances are I will find something on my long list of needs that this card will provide me or my child. And the rest of America must agree with me, as according to the Federal Reserve, over 95% of Americans have either purchased or received a gift card. 

But many gift cards can have fees and deadlines associated with their use (or non-use) that many people are unaware of, or simply choose to accept and ignore. The good news is that last week, the Federal Reserve proposed a (revised) set of consumer safeguards which would implement stricter reforms on the fees and expiration date of gift cards, gift certificates, and general-use pre-paid cards. The new provisions are part of the Credit Card Accountability Responsibility and Disclosure Act of 2009. Once finalized, they are slated to take effect on August 22, 2009.

Here is a brief summary of the proposed new rules for gift cards:

• Inactivity fees or fees for dormacy will be prohibited unless the gift card has been inactive for a period of at least one full year. After a year, any service fee for inactivity must be limited to a single monthly charge.
• Card expiration dates must extend at least five years after the purchase date.
• Miscellaneous fees such as monthly maintenance fees, re-loading fees and balance inquiry fees will not be allowed.
• There must be complete disclosure of any fees or charges associated with the gift card use and purchase.

With these new proposed changes, the potential for abuses by gift card issuers will be significantly reduced. Consumers will still need to ensure that they review the fine print and disclosures on the cards thoroughly, as there are still conditions under which fees may be charged and it is important to be aware of these. Additionally, the proposed reforms do not restrict upfront fees for purchase of a gift card, which are sometimes associated with the ”generic” gift cards issued by Mastercard or American Express, for example. Consumers should keep an eye out for these upfront fees and be sure their purchase warrants them.

Unfortunately, the new revisions won’t be in place for the upcoming holiday season. Many retailers, however, have already changed their fee structure on gift cards (or never had the “abusive” fees to begin with) so consumers need only to be sure to read all the fine print when selecting a gift card this holiday season.

Readers, does anyone have a good story about fee abuses associated with a gift card you received? If so, share your story by leaving a comment!

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