November 6, 2009
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News: CC Reform and Gift Cards
Most likely you have heard about the new credit card reform bill that continues to be a major source of irritation for lenders, cardholders, and lawmakers. However, did you know that the bill also contains provisions that regulate the purchase and use of gift cards as well? Unlike the provisions that are scheduled to go into effect in February 2010 covering credit cards, provisions covering gift cards go into effect in August 2010. With the holiday season approaching very quickly, many credit card customers will be purchasing gift cards. Many of these gift cards have fees and penalties attached to them that consumers are typically unaware of. If you intend to give gift cards this holiday season, you'll want to thoroughly check out what if any fees are attached to them.
Recently Chicago's channel 7 news interviewed Joan Jensen, President and CEO of The Central Credit Union of Illinois on the pitfalls of some gift cards. Jensen says you should be familiar with the various merchant gift cards. Some states have more protections than others. In Illinois, merchants must make gift cards good for a minimum of five years. Many of them have no expiration date, inactivity fees or purchase fees. The major credit card networks who also sell gift cards usually charge a small fee between $4 and $7. Some may also charge a fee for each month the card remains inactive. These credit card networks also often charge a fee to the cardholder for balance inquiries.
An easy way to remember which gift cards typically offer the best deal is that store specific cards where the card can only be used at that store, i.e. Home Depot, Lowe's, Kohl's, usually do not come with any hidden fees. On the other hand, cards that are not store specific that are issued by the major credit card networks Visa, MasterCard, Discover, and American Express. Additionally, care should be taken to purchase cards from merchants that are not likely to go out of business any time soon. Some valuable questions to ask when considering purchasing a gift card are: What if any fees are attached to the card? What happens if the card is lost or stolen? What restrictions are on the use of the card? What happens to any remaining small balances?