Looking a gift card in the mouth
As simple as it seems, giving and receiving a card can offer complications. For one thing, it's the retailer that often winds up with the gift, pocketing money spent on the 10 percent to 12 percent of cards that never get used. There are also fees and charges to consider. Here are some tips for that stocking stuffer.
Christmas traditionally meant gifts wrapped with ribbon and bow, or maybe the occasional check in an envelope. But for many harried shoppers, the default present has become a gift card.
In fact, 8 in 10 shoppers are planning on purchasing gift cards this year, according to the National Retail Federation. The most popular cards are for restaurants, followed by department stores and spas, according to the Retail Gift Card Association.
But as simple as it seems, giving and receiving a card can offer complications. For one thing, it's the retailer that often winds up with the gift, pocketing money spent on the 10 percent to 12 percent of cards that never get used. There are also fees and charges to consider.
Here are some tips for that stocking stuffer:
-Terms and conditions: When purchasing a gift card, pay close attention to the terms and conditions. The card may be redeemable only in a certain store or location. Domino's Pizza's $100 gift card, for instance, can be used only at specific participating stores. Or a card may not be usable at a department store's outlet locations.
It is also important to check the card isn't damaged, scratched or tampered with before your purchase.
-Upon receiving a card, register it on the website listed on the card and write down details such as the card number, customer services and any terms listed on the back. Better yet, photocopy the front and bank of the card in case the card is lost or stolen. Some stores, such as Bloomingdale's, will replace cards only with proof of purchase, such as a receipt.
-Some companies charge fees to replace lost or stolen cards. These tend to be "open-loop" cards, or ones typically issued by credit card companies, malls and banks. These fees may range from $5 to $15, according to the National Consumers League.
Fees may be charged for checking the card's balance or transferring the remaining gift amount onto a new card. Federal law, however, states that if funds are available, a new card must be issued at no cost.
A gift card doesn't guarantee the retailer issuing it will exist forever; therefore it's best to use it as quickly as possible. That's especially true if it's from a pop-up store that's around only for the holidays.
"The store could go bankrupt without notice. With a stroke of a pen, the judge could declare all outstanding gift cards null and void," said Mary Hunt, a Cypress, Calif., personal finance author who runs the DebtProofLiving.com website.
Use-anywhere gift cards, such as those from American Express, Discover and the Citi Prepaid MasterCard, carry purchase fees. This is an upfront fee, also known as a delivery fee, that reduces the actual value of the card.
The Citi Prepaid MasterCard is the most costly, at $9.95; Amex and Discover both charge $3.95, according to Hunt's site.
Some cards also charge "dormancy" fees - that is, fees that apply six to 12 months after purchase if the card has not been activated. Those can vary from $1.50 to $2.95 per month until the card's value has been depleted.
Open-loop cards may also charge "maintenance" fees, which range from $2 to $3 per month; those fees don't depend on card activity.
In addition, "if you overspend on a general-purpose gift card, you may be subject to overdraft charges which you weren't aware of," said Ellen Schloemer of the Center for Responsible Lending.
If you get an unwanted card, all's not lost. Rather than letting it expire, you can sell it or trade it for another card at a discounted rate on sites such as GiftCardGranny.com and PlasticJungle.com. "I use these sites a lot to buy other people's cards for wedding presents; you're looking at an average of 12 percent savings," said Andrea Woorch, a consumer and money savings expert for Kinoli Inc., based in Bakersfield, Calif.
But experts say you should be cautious about buying used or discounted cards from Craigslist.org and eBay.com, or less mainstream sites. If pop-up advertisements tell you you've won a gift card that is unrelated to the website you are on, or which then connects you to an unrecognizable website, you probably should close those pop-ups immediately.
Finally, keep one last thing in mind: Cold, hard cash still ranks as the most desired gift of all, chosen by 37 percent of respondents to a Christmas survey by Deloitte LLP, the financial consultancy firm.
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