CARD Act Changes Alter Gift Card Market, Add Consumer Protections
In addition to being versatile and convenient, gift cards that people receive this year will also be more consumer friendly as a result of changes instituted by the new credit card law (CARD Act), the last part of which was enacted in August 2010.
This law prohibits the expiration of gift cards before five years have elapsed since their sale and restricts the assessment of inactivity fees until a card goes unused for 12 consecutive months in a row. These changes will allow cards to retain their full value for longer and give consumers a longer window within which to redeem them for goods.
“Most of these changes affect gift cards that you can use in multiple locations like those offered by Visa, MasterCard, American Express and Discover,” said Odysseas Papadimitriou, CEO of WalletHub.com, a leading credit card and gift card marketplace. “My recommendation is that consumers get gift cards tied to a particular retail organization because in a lot of cases they have no fees and don’t ever expire.”
While CARD Act restrictions substantially mitigate the impact of fees on gift cards, many such cards still may not be taken at face value. Most general-purpose gift cards charge purchase fees that make their retail price higher than the amount loaded on the card.
The CARD Act does force gift card issuers to print all associated fees and restrictions on the back of cards. However, this rule will not take effect until after the holidays because requiring a sooner implementation would necessitate the production of new cards, which typically takes six months, making it difficult for stores to fill their shelves. This means that what is written on the cards found in stores this holiday might now be wrong in light of CARD Act changes.
Still, experts believe that CARD Act regulations will positively affect the gift card market this holiday season, despite up-to-date terms not being printed on cards.
“Gift cards were already popular among consumers. These changes will only make them more so by allowing consumers to buy any type of gift card with greater confidence,” said Papadimitriou. “The fact that outdated regulations will be printed on the cards themselves is inconsequential because issuers are required to make an effort to inform consumers of current rules through ads and in-store displays.”
Consumers should also be aware of the fact that if their gift cards go unused for 2-5 years, they might be assumed by their state as unclaimed property. Once this occurs consumers have the ability to recoup the value of their cards, even if they have expired. According to a CARD Hub study on gift cards as unclaimed property, six of the ten most populated states in America have some form of a gift card claims system.