Shopper Beware! How Gift Cards May be Ripping You Off!

The holidays are upon us again, and more people than ever are turning to gift cards. While these can save you on shopping nightmares and allow you to give exactly the gift your recipient wants, the cheer of gift cards can quickly turn sour. Gift cards have caused headaches and earned a bad reputation because they end up often either not being used or being redeemable for less than you paid for them.

Retail-Issued or Bank-Issued Cards – Know where your card can be used

There are 2 basic types of gift cards. Most common are retail-issued, or store-specific, cards to places such as Home Depot, Kohl’s, or Target. Then there are the bank-issued cards from Visa, MasterCard, and American Express that allow you to shop at multiple places. Perhaps you don’t know the recipient well enough to know where they shop, so with a bank-issued card you are paying for the convenience of being able to shop at a variety of locations. These cards do have limits though, and you may not be able to use them everywhere. For example, you probably will not be able to use your bank-issued card for air travel. And some cards for retailers cannot be used for online purchases. So when you buy the card, be sure to read the fine print. You don’t want to give a card to your aunt who purchases everything online if she can only use it in person at a store 20 miles from her home.

You can find retail-issued cards that are good at a variety of places. For example, you can get a card that is good at 4 different restaurants. This way your recipient has a variety of choices of where to spend the card. These cards will generally have logos on the front of all the places they can be used.

Watch out for cards that expire or draw monthly fees

Many cards now expire within 6 months to a year, or begin drawing fees if they are not used within a certain timeframe. That $50 gift card you have been saving to buy your new briefcase may be worth $0 if you don’t use it in time. Or you may find that your $100 gift card is now only worth $30 because the store has been taking a monthly “maintenance fee” or “dormancy fee” because there is still a balance after a year. Those balance fees can add up fast, and you don’t want to end up at the check-out register wondering where all your money has gone. Some cards, like the Visa iCARD have in recent years charged a $25 fee for maintenance after 6 months is up. Some cards, like the Mastercard Good2Go, cost an extra $9.95 to purchase and charge a $4.95 per month fee. This year American Express has decided to drop their $2 per month maintenance fee, but it can still cost between $3-$7 to buy the card. So when you are purchasing gift cards, make sure you know the guidelines up front and choose the best option. You want your gift to go to your recipient, not to banks and fee collectors.

Which card should I buy?

Forbes has a list of 10 Gift Cards to Buy and Avoid. They share some of the common cards that have no fees or expiration and compare them to cards you should watch out for with extensive fees.

The most important thing is to know what you are buying when you buy the gift card. Ask the company about their gift card policies and read the fine print. Would it be better to give your recipient cash this year? Above all, remember the reasons you are giving and the purpose behind the gift. That’s what matters. So beware the tricks and fees of gift cards, and be sure to enjoy this holiday season!

Tags: gift cards, save money