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‘Cash’ gift cards give and taketh away

Friday, October 30, 2009

When the Friday before Halloween is considered "Black Friday," you know the holiday season has descended, not matter how early it is. Offered by companies like Visa, Mastercard, and American Express, general purchase "cash" gift cards have become a popular item for present-seeking consumers. Before you buy, however, it's wise to make sure you understand how these cards operate.

A recent study by Consumer Federation of America found that these type of general purpose, or "cash," gift cards are still confusing to many consumers. The study found that a whopping 54 percent of respondents did not understand that some gift cards charge a monthly fee after 6 to 12 months while just 33 percent knew they were charged a fee to buy the card. Gift cards generally cost around $4 to $7 to purchase and have monthly fees as high as $4.95 six months after purchase.

To better educate consumers, CFA and the National Association of Consumer Agency Administrators (NACAA) teamed up to create a handy fold-out brochure that they'll make available at places like CVS and Walgreens. American Express will also give out copies.

Click here to download a copy of the fold-out guide to gift cards.

If you're thinking of "gifting" a general purpose card, consider waiting until next year. A new federal law goes into affect in Aug. 2010 that will prohibit fees from being charged on gift cards that have been used in the past 12 months.

For more information on gift cards, visit the Federal Trade Commission's online guide, Buying, Giving, and Using Gift Cards.