The new rules on gift cards were issued by the Federal Reserve on 23rd March, 2010, especially to protect the consumers from problems faced by them while using gift cards. These rules apply to retail gift cards only, like the Discover gift card, MasterCard, American Express, and Visa gift cards, etc.
A gift card is the one which looks like a credit card but works like a gift voucher. Gift cards are generally used to pay for purchases. The money available from the card can either be used all at once, or as and when required. Purchases can be done only up-to the value of the card. Banks do issue gift cards, which work as redeemable gift certificates, and transaction fees may be charged on these cards.
However, consumers do face a lot of problem while using gift cars. Some gift cards expire in less than 5 years, some suddenly lose their value. Thus the Federal Reserve has issued some new rules to protect the consumers from gift card scams and problems. The rules will be going in effect from 22nd August, 2010.
The rules are:
1. Card cannot expire in less than 5 years - According to the Federal Reserve, gift cards cannot expire in less than 5 years time. The 5 year duration is calculated from the date of first issuance of the card, or the date when the card was last reloaded.
2. Fees to be disclosed at time of purchase - The rule requires the company to provide the consumer with the details of all the fees at the time of purchase of the gift card.
3. Single fee per month - Only a single fee can be added per month to the gift card.
4. Inactivity fees added – Only if a gift card is not used for more than 12 months, the inactivity fee can be added to it.
5. Expiry date and fee displayed on the card – The rule requires the company issuing the card to display the date of expiry of the card, and the fees on the card itself.
6. Service fees - The services fees on gift cards can consist of ATM withdrawal fee, balance inquiry fee, balance reload fee, etc.
Limitations of the rule
The rules, however, do not apply to every gift card. There are some exceptions to the rule. The rules are not applicable on re-loadable cards which are not labeled as gift cards or even gift certificates like flexible-spending account cards, payroll cards, etc. It doesn’t apply to cards which are not for the common man, and the prepaid cards which are for long distance telephone calls, wireless telephone services, etc. It also does not apply to loyalty cards, award or promotional cards.