Fewer ugly gift card surprises, thanks to consumer activists...and the FTC

Ever held onto that gift card for a few months, waiting for the perfect time to use it, only to find at the check out counter that it had expired a week ago? Or that it had hidden fees attached? Or that you could only use it at certain branches?

That's a holiday surprise not as likely to happen this year, thanks to some key rulings by the Federal Trade Commission and several states that have decide to regulate their use, according to the Washington Post.

The National Retail Federation is predicting a jolly holiday season for the gift card industry, with sales reaching $26.3 billion, up from $24.8 billion last year. The average consumer will spend about $122.59 on gift cards this year, compared with $116.51 last year, the federation said.

Many retailers have responded to consumer complaints that gift cards had too many strings attached, in the form of hidden fees and expiration dates. But in the fifth annual gift card survey, Montgomery County's Office of Consumer Protection found that 18 of the 22 retail cards it examined now have no fees and no expiration dates, and also could be readily replaced if lost or stolen.

This is a huge drop from 2003, when the study said that 60% of retailers' cards examined carried expiration dates and fees.

Regulatory pressure resulted from the consumer outcry. Earlier this year, the FTC settled cases against Kmart and Darden Restaurants, the parent company of the Olive Garden, Red Lobster and other establishments, for failing to properly disclose expiration dates and dormancy fees. Also, some 30 states now have legislation regulating gift card expiration dates and fees.

Use it or Lose it

According to the article, experts advise consumers to take more responsibility in using gift cards they may receive. "If you are the recipient of a gift card, use it promptly because if you don't, it may devalue or, more likely, you may lose it," said Jack Gillis, a spokesman for the Consumer Federation of America told the Post. "It seems clear that these companies are benefiting from the fact that a lot of gift cards simply don't get used for whatever reason."

A recent survey by Consumer Reports found that many gift cards go unredeemed. In fact, 27% of respondents had not yet used gift cards received last year. Tower Group, a research and advisory firm in Needham, Mass., found that $7.8 billion in gift card value will go unused this year. Last year, the firm's study showed that $8 billion had been left unspent.

Tips for Gift Card Use

Consumers should be particularly wary of cards purchased from the big four credit card issuers and major shopping mall operators. These cards are not as well regulated and tend to have expiration dates and maintenance fees or dormancy fees, the author of the study said.

Consumer advocates advise gift givers to make sure the gift card is from a retailer the gift recipient actually wants to go to. Also, make sure to also give any information regarding limitations or fees, since that information often comes separately from the card. It's no gift if you only get half the pertinent information about when you can or can't redeem the card.

They also recommend that gift card givers register the gift card, if possible. That way they can be replaced if lost or stolen.

Most importantly, experts say when you get a gift card, go out and use it right away. And as close to the penny as possible. This minimizes your risk of losing the card in the post-holiday clutter, and redeeming it to the fullest value possible.
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