What You Need to Know About Gift Cards

The CARD Act of 2009 has regulations that affect gifts cards. Starting on August 22, 2010 the CARD Act will require that gift cards have a five year expiration date that must be disclosed to the consumer in advance. These regulations do not apply to prepaid telephone cards and reloadable gift cards.

Gift cards and gift certificates that have not been used can't incur inactivity fees for at least 12 months, and the amount and terms of the fee must be disclosed to the consumer in advance. After a year, only one fee can apply each month. Previously multiple fees were applied each month.

In September 2009, American Express ended its monthly gift card inactivity fee that states that after a year a card that had a balance was charged $2 deduction every month until the balance was zero.

Unfortunately gift cards can still charge upfront fees such as a fee for activity the card which can range from $4.99 - $9.99.

Consumers unfortunately may have to pay higher fees upfront after August 22, 2010 to make up for the revenue companies will lose by not being able to charge inactivity and other fees after the card is purchases.

Help for Gift Card Buyers

This year we will see a lot of changes in the banking industry. We have seen the CARD act that became effective February 22, 2010. A new regulation for debit cards becomes effective July 1, 2010. Now as part of the CARD Act a new regulation by the Federal Reserve will begin on August 22, 2010 that affects gift cards sold on or after August 22, 2010.

The new regulation applies to gift cards, non-reloadable or promotional program prepaid gift cards and gift certificates. The new regulation puts restrictions on inactivity or service fees which caused many consumers to lose the value on gifts cards or gift certificate due to the outrageous inactivity or service fees charged.

Here are some of the major features of the new gift card regulation:

1. Inactivity or service fees will only be allowed for a gift certificate or gift card that has been inactive for at least one year.

2. Only one fee can be charged per month and the consumer is provided clear disclosures about the fees.

3. Additional fees that are restricted by the regulation include ATM fees, service fees, monthly maintenance fees, balance inquiry fees and transaction based fees.

4. Gift certificate, gifts cards or non-reloadable or promotional program prepaid cards can no longer be sold if the expiration date is less than 5 years from the date of issue or the date the funds are last loaded on the card.

5. Fees will no longer be charged for replacing an expired gift card or gift certificate or for refunding the remaining balance if funds are still available.

Although consumers will no longer be charged these fees you better believe that the banking industry will find other ways to earn the revenue they are losing with all the new regulations so make sure you read my blog for additional updates throughout the year.