Gift Card Fees

Wednesday, November 29, 2006

Gift cards are the chicken entrée of Christmas presents: an uninspired but inoffensive middle ground that often is the default serving. In many ways, they remove the giver from the gift-giving equation, making the experience more like personal shopping than mutual exchange. For anyone who has found a plaid tie or a six-pack of socks under the tree, this might be a good thing. But, even at their best, gift cards represent an interest-free loan to the store. And, in the case of bank-issued gift cards (those that carry a Visa/MC/Amex logo), the fees associated with the cards mean an unexpected gift to the bank. For example, California generally forbids dormancy or inactivity fees for store-issued gift cards. But when the gift card can be used at multiple retailers, these laws do not apply. Industry standard for inactivity fees on bank-issued gift cards is $2.50 per month after 6 months. These small dings can sneak up on you if you don’t use the cards promptly. Bank-issued gift cards also contain a “purchase fee,” averaging around $4. The worst-case scenario is a gift card from Washington Mutual, whose minimum purchase fee is $5.45. If you’re giving your nephew a $50 card, that’s 11% that goes to the bank—a ratio even worse than Coinstar. The Wall Street Journal recently published a breakdown of gift card fees. Here you can learn that Borders will replace lost gift cards, but Barnes & Noble will not. Or that a few companies (notably Amazon, Blockbuster, and American Eagle) charge dormancy fees, while most others do not. If you find yourself stuck with a low-value bank-issued gift card, large retailers often will accept multiple cards as payment. Use up those last few bucks, then pay for the rest on another card. Otherwise, you may be providing a generous stocking stuffer to a giant bank come next year. Besides Ebay, there are numerous places to sell or trade gift cards, like Gift Card Buyback, Card Avenue, and Gift Cards Again.

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