Gift Cards

Retail or bank gift cards don't rip, fit in your wallet just like a credit card, and can be spent for something you really want (versus being stuck with an ugly sweater that doesn't fit, or some other worthless item). While they're becoming more popular by the minute, there are some hidden traps to watch out for.

Gift cards are plastic cards resembling credit cards that can be used at a cash register in the same way you use a credit or debit card. They can be purchased at stores, banks and online, and are generally linked either to a specific store name or a specific credit card company (such as Visa or Mastercard).

Cards can be purchased in fixed amounts (such as $25, $50 or $100), or in any amount a buyer desires, up to a preset maximum. Some cards can be reloaded with extra amounts of cash, but most just expire when the balance is spent.

Many consumers see gift cards as a way to stretch gift-giving value, as the cards can be used to purchase items that are on sale.

But consumer advocates warn that it's important to read the small print to make sure you know exactly what you're getting (or giving).

Check The Expiration Date

Many gift cards expire as early as six months after they are issued. If you don't use the entire amount of the gift card before it expires, you lose that money. So it pays to spend the whole amount of the gift card before it expires.

Stores and banks don't let you know if there's cash left on your gift card, so it's important to keep a running tally.

Hidden Costs

The National Retail Federation urges consumers to watch out for unexpected costs hidden in the fine print on the back of the card or on an accompanying information sheet.

If you buy a gift card online, you'll end up paying service, transaction and shipping fees, which can add up to 10 percent of the value of the card. So it's best to buy a gift card in person when possible.

Although bank gift cards can be used at many retail stores, banks charge higher service fees than retailers. It pays to shop around to find the lowest possible fees. There may also be ATM charges when you use bank gift cards.

If you don't spend the entire value of the card within as early as six months, most companies will start charging a monthly fee of $2 to $3 to keep the card open. Retailers argue that it costs that much to hire third parties to manage the gift card process, so it's fair to pass that cost along to consumers. These "maintenance" or "dormancy" fees are deducted from the value of the gift card each month, so you may not be aware of the declining value of your card unless you've been keeping track of the exact balance.

If you don't use up the entire value of the gift card, some companies charge a "closure fee" of up to $15 to cash out the remaining balance.

If the card is lost or stolen, you may be able to get a new card reissued. But many stores charge a "reissue fee" of more than five dollars. And some stores require the original receipt and card number to verify the initial purchase.

Although there isn't yet a federal law on gift cards, Massachusetts and California already have state laws that ban monthly maintenance fees and assure that gift card recipients get the full face value of their gift cards.

General Consumer Rights Message Board for more help