As American Express cuts gift card fees, will other firms follow?

In what could become a trend-setting move, American Express (AXP) announced Wednesday that it will eliminate all monthly fees on its gift cards. Prior to this decision, gift card holders were charged $2 per month after the first 12 months of use. American Express gift card users will still have to pay purchase charges of between $2.95 and $6.95, as well as transaction fees each time their cards are swiped.

Other gift card issuers may follow American Express's lead, but even if they don't do so voluntarily, by of August 2010, they won't have a choice. The Credit Card Act of 2009 limits banks and retailers from charging inactivity or service fees unless a card has been dormant for at least 12 months. The law also mandates that cards can't expire until five years after their purchase date. Congress is thinking of moving the full implementation of the law to December 1. So American Express is just moving to make the changes in time for the holiday shopping season. I expect others will quickly follow suit.