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Plan Well, Retire Well

Saving and investing your money

Do You Love Them or Hate Them? Gift Cards!

Gift cards! It's that time of year when I struggle with my love/hate relationship with gift cards. On the one hand, they're very convenient and may be more appreciated by my young relatives than other gifts I might choose, especially as I don't know what's "cool" or "sick" to wear or own. On the other hand, they're impersonal (in my opinion) and full of potential consumer traps.

However, clearly lots of people love gift cards as Booz & Co.'s Holiday Retail Outlook predicts that more than 80 million shoppers plan to purchase gift cards – about four percent more than last year. So, let's take a closer look at using gift cards from the "good news versus bad news" perspective.

Good News: Thanks to consumer protection that went into effect two years ago, gift cards can no longer expire in a short amount of time. Money on a gift card cannot expire for at least five years from the date the card was purchased, or from the last date any additional money was loaded onto the card.

In addition, gift card fees are mostly regulated:

  • Inactivity fees can be charged only after a card hasn't been used for at least one year, and you can be charged only once per month;
  • Fees must be clearly disclosed on the card or its packaging.

Bad News: Consumers still need to be aware of fees!

  • You may be charged a fee to buy the card;
  • You may pay a fee to replace a lost or stolen card.

Sometimes people find it difficult to use their gift card. First, you have to find wherever the gift card was stashed after the holidays. That may not be a problem in your household, but it has been in mind!  In addition, I've spoken to people who have not been able to redeem their gift card because a local store closed or a large corporation went bankrupt.

Tips: When you shop for a gift card, the FTC recommends that you:

  • Buy from sources you know and trust. Avoid buying gift cards from online auction sites, because the cards may be counterfeit or may have been obtained fraudulently.
  • Read the fine print before you buy. Is there a fee to buy the card? If you buy a card by phone or online, are there shipping and handling fees? If you don't like the terms and conditions, buy elsewhere.
  • Inspect the card before you buy it. Verify that none of the protective stickers have been removed. Make sure that the codes on the back of the card haven't been scratched off to reveal a PIN number. Report any damaged cards to the store selling the cards.

In addition, I would suggest that if you receive a gift card that you use it soon before you forget you have it and the value is eaten up by inactivity fees!

What's your opinion?  Do you like to buy or receive gift cards?  Is it better or worse than socks?

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