Gift cards offer people the freedom to choose their own gift. However, many people are surprised to discover that these simple plastic cards often have various spending restrictions. These limitations can affect how and where the cards can be used, potentially causing frustration for both givers and recipients.
Open vs. closed loop cards
Typically, gifts cards fall into two groups: open and closed loop cards. Unlike closed-loop gift cards, open-loop gift cards can be redeemed at multiple retailers. Despite their flexibility, these cards often come with unexpected limitations, such as purchase fees ranging from $3.95 to $6.95, monthly inactivity fees, and restrictions on online purchases. Closed-loop gift cards are specific to individual retailers or restaurant chains. While they don’t typically charge purchase fees, they have their restrictions, including limited use to particular stores, no cash withdrawal options, and the potential for complete value loss if the business closes.
Financial incentives for issuers
Retailers and card issuers implement these restrictions for various financial reasons. Gift cards can protect companies’ profit margins while providing consumers convenience by limiting their uses. Companies benefit from breaking the industry term for unredeemed gift card balances. When cards expire or remain partially unused, that money stays with the issuer. The National Retail Federation estimates that approximately 3% of gift card value goes unredeemed annually, translating to billions in revenue for retailers.
Consumer protection laws
Responding to consumer complaints about unfair gift card practices, various regulations have been implemented to protect purchasers and recipients. The Credit CARD Act of 2009 established important protections:
- Gift cards cannot expire for at least five years from activation
- Inactivity fees cannot be charged until after 12 months of non-use
- Fee terms must be disclosed before purchase
Many states have enacted additional consumer protection laws that further regulate gift card practices within their jurisdictions.
Maximizing gift card value
Consumers can take several steps to maximize the value of their gift cards despite restrictions. Being aware of potential limitations before purchase is essential. If you receive a gift card with restrictions that make it difficult to use, consider trading it on gift card exchange websites. These platforms allow you to sell unwanted cards for cash or trade them for cards you’ll use. Always read the fine print before purchasing a gift card. Pay attention to expiration dates, fees, and usage limitations. If you plan to give a gift card, consider the recipient’s shopping habits and preferences to ensure they’ll be able to use it without complications.
Digital alternatives
There is an increasing popularity of digital gift cards, which offer more flexibility than traditional plastic cards. E-gift cards can be sent instantly, reducing the risk of loss or theft. Many digital options also allow for partial redemption, making it easier to use the entire balance.
Tracking balances and expiration
After making a purchase, remember to check giftcardmall balance regularly to track remaining funds and avoid forgetting small balances. Many retailers now offer mobile apps or online portals that make monitoring your gift card balances and expiration dates easy. Gift cards can be convenient presents, but understanding their restrictions helps ensure both givers and recipients get the most value. By being informed consumers, we can navigate the gift card landscape more effectively and avoid unexpected disappointments.
