New Laws Make Gift Cards More Appealing; the Regulations Are Designed to Protect Consumers from Fees That Can Steal Funds

Article excerpt

Byline: DAVID BAUERLEIN

Gift cards continue to march across the retail landscape.

As in past years, they are expected to be popular items for holiday season shoppers.

In a new wrinkle, some retailers are making it possible to order gift cards online via Facebook and then send them in electronic form directly from one Facebook friend to another. Sears and Kmart announced last week their Facebook pages would give Facebook users that option to order and send the retailer's eGift card. The eGift card would either show up on the recipient's Facebook wall or at an e-mail address, along with instructions for how to use it.

If you decide to buy gift cards for someone, there are some new consumer protections aimed at ensuring fine print won't drain value from the gift card before the recipient gets around to spending it.

Let's start by breaking down the two main categories of gift cards - the kind that is issued by a specific retailer for use at only its stores or restaurants, and the second kind that is issued by banks and can be widely used.

Florida has had a law on the books since 2007 that says the store-brand gift cards sold in Florida cannot have expiration dates or fees that lower the value of the cards. Many other states passed similar laws for the store brand cards. Consequently, retailers and restaurant chains across the country eliminated those gotcha features from their cards.

But Florida's law didn't apply to the bank gift cards issued by financial institutions. Those cards display the logo of American Express, Discover, MasterCard or Visa.

This year, the federal CARD Act that placed new regulations on the credit card industry also added some consumer safeguards for gift cards from financial institutions. They cannot expire for five years or charge inactivity fees until the gift card has not been used for at least 12 straight months.

That inactivity fee is typically $2.50 per month, according to a bankrate.com survey released this month. Not all bank cards charge the inactivity fee, but most do, bankrate.com found.

Still, a full year should be plenty of time to fully spend a gift card and avoid any activity fees, particularly because the advantage of the bank-issued gift card is it can be used wherever the card's logo - MasterCard or Visa, for instance - is taken. …