Posted on: Sunday, December 7, 2003
Gift certificate cards can carry hidden price
By Barbara Woller
Gannett News Service
|Gift cards make easy and welcome presents for the holidays, but be sure to check whether they decline in value if not used for a while.
Eugene Tanner The Honolulu Advertiser
In some cases, dormancy, or inactivity, fees can reduce a gift card's value to zero. What's more, unless you tell recipients about the fees, they might not realize the cards have lost value or are worthless.
Sen. Charles Schumer, D-N.Y., is considering federal legislation to ban such charges, so the cards can be used at any time for their full value. He recently released a survey of 32 retailers that found 18 charged monthly fees if the full value of the card was not used after six to 24 months.
For example, a gift card from Starbucks Coffee carries a $2 monthly fee if not used within 12 months. That means if a person receives a $50 gift card but does not use it for two years, its value falls to $26.
Other gift cards can be used in any store at a particular mall, such as the cards from Simon Property Group, which owns more than 200 malls in 36 states. These carry a $2.50 monthly dormancy fee after six months. If a $25 gift card is not used in the first year, its value falls to $10.
"Anyone who has ever gotten an ugly sweater from Aunt Edna knows what a godsend gift cards can be," Schumer said in a prepared statement. "But they should come with a warning attached."
The National Retail Federation reports that consumers are expected to spend $17.24 billion on gift cards this season, for an average of $34.24 per card. The average shopper buyer is expected to buy more than three cards.
Some states are starting to pass laws regulating dormancy fees. Massachusetts banned gift card fees effective June 1. California passed a gift-card law that goes into effect Jan. 1 and bans virtually all service fees on gift cards.
Hawai'i has no law banning such fees, and no legislative bills have addressed the issue, said Stephen Levins, state consumer protector.
"This whole area is so new, there really haven't been any good surveys or studies of industry trends," said Anthony Andreoli, national director of the unclaimed property practice with Deloitte and Touche.
Many people do not use all or part of the value of their gift cards. According to Consumer Reports, that could mean "a potential $4 billion windfall to be reaped by retailers and banks" this year.
Mandy Walker, an associate editor with the magazine, advises holding on to the receipt of any gift card purchased and writing down the identification number. Some retailers will make good on the card if it is lost or stolen.