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LEGAL MATTERS: Why You Need To Use That Gift Card NOW

Wednesday, January 16, 2013

 

You've got a fistful of great gift cards after the holidays, but how long are they really good for?

If someone took perfectly good cash (you could have used anytime, anywhere), and turned it into a gift card or gift certificate (that you now can’t), you need use it fast. If you don’t, there is a real risk the gift will become worthless and the law won’t protect you. 

One of the biggest risks is you will forget about the gift before you use it; one financial firm estimates almost $2 billion worth of 2012’s gift cards will never be redeemed. Equally dangerous is something you have no control over and that is the business involved going out of business; consumers were stuck with $19 million in useless gift cards when the Sharper Image stores closed less than 2 months after Christmas in 2009.

Assuming you do not forget about the gift, and the business doesn’t close, your rights under the law depend on what type of card or certificate you received: 

Gift Card or Gift Certificate Issued by a Local Rhode Island Business

  • Only good at the store that issued it.

  • Regulated by Rhode Island state law.

  • Cannot expire.

  • Does not lose value over time.

  • Can be redeemed for cash once the value is less than $1.

  • The merchant does not have to reissue it if you lose it.

 

Visa, MasterCard, Discover or American Express Gift Card

  • Issued by banks and accepted at stores that accept credit cards.

  • Regulated by The Card Act of 2009, a federal law.

  • Can expire after 5 years.

  • Can lose value after the first year because of maintenance fees.

  • Can be reissued if it is lost or stolen but fraudulent charges will not be refunded.

  • Cannot be used for on-line shopping because there is no name or address associated with its owner.

 

Major Store or Restaurant Gift Card

  • Most do not expire and most do not lose value because of fees. (Macy’s, Target, Walmart, Chili’s, Cheesecake Factory, etc.)

  • But read the fine print because, if the business opted to issue it in such a way that it is exempt from state law, the card can expire and it can lose value because of maintenance fees.

 

Groupon or LivingSocial Deal

  • The law on these is evolving as authorities wrestles with whether they are gift certificates or coupons.

  • You generally have to use the entire voucher at one time. (So if you only buy $40 worth of food with your $50 voucher, you cannot use the remaining $10 for your next purchase.)

  • After a voucher expires, both companies tell merchants they do not have to honor the entire voucher (i.e. $50 of food for $25) but they do have to credit the holder with the purchase price of the voucher (i.e. just the $25 cost of the $50 voucher).

  • Groupon promises to refund the purchase price of a voucher if a business closes; LivingSocial only promises a refund if the business closed before the deal expired.

 

Reloadable Value Credit Card

  • Worst cards for consumers.

  • Issued by companies like GreenDot and Vanilla bearing a Visa or MasterCard logo.

  • Lose value every month because of maintenance fees.

  • Typically charge lots of ‘junk’ fees including a fee for checking your balance.

  • Can be used at ATM’s if you pay fees up to $4 per withdrawal.

  • Can be used for on-line shopping if you register your name and address.

 

Sell Them?

If this article did not scare you into using your gift cards right away, consider selling them at a site like GiftcardRescue.comCardPool.com or Giftcards.com.  The sites will typically pay you 80% - 90% of a card’s face value if it is from a national chain.

John Longo is a consumer rights attorney practicing law in Rhode Island and Massachusetts. He represents consumers who have disputes with businesses, employees cheated out of their wages or overtime, car buyers stuck with Lemons, and people in need of bankruptcy protection. He is a member of the National Association of Consumer Advocates, the National Association of Consumer Bankruptcy Attorneys, and the Rhode Island Association for Justice.

 

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