Fruitcake And Gift Cards: Guess Which One Has An Expiration Date?

With Christmas fast approaching, it’s time to start worrying about last minute shopping. For some of us, it will be a rush to find a perfect gift, carefully selected to fit the personality of that special someone. For others, it will come down to just putting a check in a Christmas card with a note to “buy something nice.” In between, there is the gift card.

Since many of you will be buying gift cards this holiday season, you’ll need to protect yourself by being aware of the laws regulating the sale and use of such cards. Yes, it’s time once again for my annual post on gift card laws. Like your grandmother’s fruitcake (and just as welcome), it wouldn’t be Christmas without it.

Gift cards are covered by a variety of state and federal laws that provide substantial protection to the consumer.  But even with all those laws, your gift card can lose value or become worthless if you aren’t careful. Here are a few of the relevant rules:

Your gift card can expire.  By federal law, a gift card that is redeemable for general goods or services must be good for at least five years from the date the card was sold.  If the gift card can be reloaded, the card must remain good for at least five years after the last time money is added to the card.  The expiration date and any other conditions relating to the expiration of the card must be stated clearly on the card.

Your gift card can lose value.  The company that issues a gift card can impose fees on the card that reduce its value over time.  The most typical is an “inactivity fee” that is charged for maintaining a card that is not being used.  These fees can eventually reduce the value of the card to zero, even though the card has not technically expired. 

If the gift card can be used at multiple stores, like Visa, Mastercard or mall gift cards, the issuer cannot charge an inactivity fee unless the card has been inactive for a full year, and a fee can be charged only once a month while the card is inactive.  For gift cards that can be used only at a single store, or at a group of affiliated stores, no fees can be charged at all during the first two years after the card is issued.  The amount of any fee and all conditions relating to the fee must be stated clearly on the card.

The laws don’t cover certain types of cards.  In general, the gift card laws apply only to cards that are purchased at full face value.  They do not apply to customer loyalty cards (“buy-ten-get-one-free”), cards that are sold as fundraisers by charitable organizations, or cards that are given away by employers as rewards or incentives. It also appears that the laws would not apply to gift cards purchased for less than face value through services like Groupon.

Although Ohio does give some protection to consumers, ScripSmart.com continues to give Ohio a grade of “F” for its regulation of gift cards. Consumer advocates would like to see Ohio follow the lead of other states that have much tougher gift card laws. Some states do not allow gift cars to expire and completely ban inactivity fees. A few states even require stores to give cash back when the balance on a gift card falls below a certain amount.  The fact that Ohio has none of these protections is what earns Ohio an “F” on the ScripSmart site.

As always, the best way to ensure that your gift card doesn’t lose value is to use it promptly. Another good idea is to track the balance for each card on your computer, or smart phone, or whatever you use for a PDA.  Personally, I have a handwritten note on a scrap of paper in my wallet, along with my log-in password to CompuServe. 

Have a question or a suggestion for a topic?  Email  dspirgen@SpirgenLawFirm.com.

Patch posts are general discussions and should not be used as advice on any specific legal matter.  If you need legal advice on a particular situation, please consult an attorney.