FYI Y'All....

Not as easy as it seems
Gift cards more popular, but you need to know their limits
By Ray Martin, CBS.MarketWatch.com
Last Update: 6:15 AM ET Nov. 24, 2004

This season, holiday spending looks to be up some 4.5 percent from last year, with shoppers planning to spend over $700, according to the National Retail Federation. Gift-buying for family and friends tops the list, but folks also plan to buy for many others such as co-workers, teachers and babysitters.

With so many to buy for, it's important to know what the people on your holiday shopping list really want. A National Retail Federation survey gives some insights: the most preferred gift category continues to be books, CDs, DVDs, videos and video games, with more than 53 percent responding that they would like to receive something in that category. Other top-ranking categories include clothing and clothing accessories (50.6 percent), gift cards (50.2 percent), consumer electronics (32.6 percent), jewelry (22.6 percent) and home décor (21.3 percent).

Gift cards have been steadily moving up the ranks. They are also popular gifts to buy; more than 74 percent of consumers will purchase a gift card during this holiday shopping season.

"There's no end in sight to the popularity of gift cards.....gift cards are a great option for almost any name on a holiday shopping list" said NRF CEO Tracy Mullin.

Consumers could spend a projected $40 billion on gift cards this year, spending over $17 billion on gift cards during the holidays. On average, a shopper buys 3.38 cards for a total of $108.28. Even though gift-givers may consider it a no-brainer choice, there are a few things to be aware of when buying gift cards.

Depending on where you buy a gift card, there will be different rules for where and how it can be used, and what fees apply. For example, some store gift cards expire after a period of time and others get charged a fee that eats away at the card value.

If you buy or receive a gift card this holiday season, here are the things you need to know:

Expiration dates

Some gift cards can expire after 12 to 24 months. If they are not used by that time, they are worthless. About 15 states have passed laws banning expiration dates on gift cards, but even so the value of unredeemed gift cards nationwide totaled about $2 billion last year alone.

Some states require full consumer disclosure by any retailer selling a gift card that expires in less than five years. In other states, unredeemed gift cards are considered abandoned assets after three years and turned over to state unclaimed property departments.

Transaction or issuance fee

Some prepaid gift cards issued by banks come with a fee that is charged when the gift card is issued. A fee of $5.95 to $11.95 can be added to the face-amount cost for the card -- meaning a $50 gift card could cost $55.95.

Dormancy and maintenance charges

Some gift cards also charge a maintenance fee; for example, $2 a month. These fees can begin as early as the seventh month and some begin after 24 months of inactivity. Some gift cards even charge these monthly fees retroactively to the date of purchase, which can quickly eat up all or most of the card value. This is also one technique merchants use to get around state laws prohibiting expiration of gift cards.

Lost or stolen card

Many gift cards will now allow you to register the card on the merchant's Web site, allowing you to check the remaining balance and to request a new card to replace one that is lost or stolen. Other gift cards provide a toll-free phone number to report a missing or stolen card.

When replacing a lost or stolen gift card, you will need to provide the tracking number and possibly a copy of the original receipt -- so record and keep these in a safe place. For some cards, the value will not be replaced if lost or stolen. Other gift cards may be replaced for a fee.

Portability

Some gift cards can be used at any store location. Others can be used at different stores that are affiliated with the merchant from whom the card was purchased. You'll also want to know if the card has limitations: some may not be used for purchases in a catalogue or on the merchant's Web site.

Other limitations on gift cards include prohibitions on selling your card to another individual, applying the value as a payment to a store credit account or redeeming the card for cash.

Mall- and bank-issued gift cards can provide the most portability, allowing recipients to buy merchandise at any retailer in a mall or wherever the bankcard is accepted. This flexibility can come at a cost; service fees and expiration dates are more common with these gifts cards versus gift cards issued by retailers.

One example of a portable gift card is the one issued by Bank of America. This card resembles a credit card and is redeemable anywhere Visa is an accepted form of payment.

Finally, if you receive a gift card, it could pay to use it promptly, not only to avoid dormancy and expiration fees but also to take advantage of holiday discounts.