Some gift cards are better than others for terms and fees

November 2, 2011 4:15:46 PM PDT
With Halloween now in the books, you may be turning your thoughts to the holidays. And if you are considering a gift card, you should know that some are better than others.

It's tempting to give gifts cards. A just-released consumer reports' poll finds it will be one of the most popular gifts this year. But the poll also finds a quarter of us still have unused cards left over from last year. Here's what you need to know if you plan to give a gift card.

Buying a gift card might seem like the perfect present. But Consumer Reports' Money Adviser Mandy Walker says it's important to think twice before giving a gift card.

"Gift cards are definitely better than they used to be," Walker explained. "New regulations have eliminated some fees, so you can't be charged if you don't use it within the first year. And cards can't expire for five years."

But even with new protections, there are still drawbacks.

Walker said, "The new rules apply to merchant and bank-issued cards. So if you have a reloadable card or one that's not marketed as a gift card, you're going to want to pay close attention to those terms."

Bank-issued cards are convenient because you can use them almost anywhere, but they come with fees. A Visa gift card from US Bank costs $3.95 if you get it from a branch or $6.95 if you buy it online. And after 12 months you're charged a $2.50 a month inactivity fee if you don't use it. Even charity gift cards come with fees.

"We found one that charged a $4.95 transaction fee and it charged another three percent to transfer the funds," Walker said.

But if a gift card is still the way you want to go, retail store cards usually have little or no fees. Money on gift cards is there for five years from the date it was purchased and any money that might be added to the card at a later date must also be good for at least five years. You just want to make sure the person you are buying for likes to shop in the store.

Walker said, "When you're giving a gift card, you want to include the terms and the policies, as well as the receipt, which might be needed if the card is lost or stolen."

But better yet, why not give cash or a check? That way people can shop wherever they want, whenever they want, with no strings attached.

Consumer Reports poll of holiday plans for this year found 62 percent of shoppers plan to give a gift card. The only presents that are more popular are clothing at 70 percent and electronics at 65 percent.

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