Give the Gift That Doesn't Expire



 


If you have an old from, say, Christmas of last year, or your recent birthday burning a hole in your wallet, you no longer have to stress about using it. That is because according many new rules and regulations have been recently developed to help improve consumer confidence in the financial market. Accordingly, part of the recent credit card reform has led to the development of the Credit Card Accountability, Responsibility, and Disclosure Act, also known as the "Credit CARD Act," has specific stipulations written in to include new regulations on gift cards too. These new guidelines will go into effect on August 22, 2010.

The regulation in question is in regards to policies that allowed gift card providers to charge dormancy fees for cards that were inactive longer than 12 months. Basically, if you have a gift card and you did not use it, the company who issued it could charge you a fee, and continue to charge you a fee every month until the card no longer had a value. These fees could be of any denomination, but to be fair they are typically reasonable, around $2 or $3 a month.

This is not illegal, as the money that must be budgeted for gift cards counts as a liability against the inventory of any company, who then has a right to reclaim it, technically. Dormant gift cards cost major retail chains thousands if not, hundreds of thousands of dollars every year, so it makes sense that if you aren't going to use your gift card, they might try to expend it. Perhaps they consider it lost and therefore will never be used. Nonetheless, these fees exist.

Adil Moussa is an analyst with Aite Group LLC, a Boston based consumer research firm that focuses primarily on the financial services industry. He says that gift cards do not normally expire for at least a year after they are issued; some even last as long as two years. "Just managing those dormant cards is going to add cost to the issuers," Moussa says. Because of this cost, issuers may try to find another way to charge you for it.

Even though the new CARD Act requires that gift cards cannot expire for five years after being issues or loaded with money, gift card issuing companies will still try to pay for these operating costs through fees that they issue to you. Moussa goes on to say "the way they can compensate for that is by introducing other fees that they would not have introduced in the past.

There are probably over 50 fees that you can charge for." He specifically cites balance inquiries, but it is possible that you could incur charges for loading the card with more money, or for requesting a replacement card if you lose it or your wallet or purse is stolen. They might even assign a fee for calling customer service, and yes, even for simply using the card in a normal fashion.

One specific example demonstrates that American Express chose to get rid of their $2 monthly value deduction back in September, nearly a year before this new provision is supposed to go into effect. Their policy had established that the fees would not start for at least a year after card issuance, but for some reason they felt that it was time for a change.

Using Moussa's example, American Express could still charge you for any number of other things to make up for that operational cost. They do not have to, but it is likely that they will simply to compensate for the maintenance of the account in which the money sits, waiting for you to use it.

Of course, this is not limited to American Express as it applies to all branded payment networks like Visa and MasterCard too. These provisions apply to gift certificates, store gift cards, and general-use prepaid cards that can be used at multiple merchant locations as provided by one of these international personal finance companies.

Basically, any card that yields a Visa, MasterCard, or American Express symbol and is not a privately-owned credit card will be affected. However, not every kind of gift card is affected by the CARD Act. Paper certificates, cards that are reloadable but act more like pre-paid debit, as well as pre-paid telephone cards are exempt from all of these restrictions. Any card used in a department store loyalty program, rewards program, or promotional program is also exempt from these laws.






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