When Choosing Gift Cards Over Credit Cards, Keep These Things In Mind

John Ulzheimer

John Ulzheimer | Blog

Dec 11, 2012 | Updated Apr 27, 2016

Gift cards are fast becoming the gift of choice for gift givers and recipients alike, and their popularity is growing. According to the National Retail Federation, total spending on gift cards are expected to reach $28.79 billion this year.

What makes gift cards the perfect gift? Well, you never have to worry about choosing the wrong size or color, they’re practical and convenient, and they make dealing with returns and gift receipts a thing of the past.

Granted, some may think gift cards are too impersonal and require little thought, but there is something to be said about a gift that allows your friends and loved ones to choose the gift they really want —or maybe even something they really need.

Whether you’re planning to purchase a gift card for someone else, or you’re expecting to receive one yourself, here are a few tips to keep in mind when it comes to gift cards.

Gift Card Fees

Prior to the gift card regulations that were enacted as part of the CARD Act on August 22, 2010, gift cards were riddled with hidden fees and aggressive expiration clauses if you didn’t redeem the gift card quickly enough.

This became a big problem when unsuspecting consumers would go to redeem their gift card several months later only to find that the gift card had lost more than half it’s value due to hidden fees and service charges, or even worse — that the gift card had expired due to inactivity.

Fortunately these practices are thing of the past, but there are a couple of new rules to keep in mind. Gift card regulations now limit gift card issuers from charging any fees unless the gift card goes unused for 12 consecutive months — and even then, the fee is limited to one per month.

The regulations also require gift cards to remain intact and valid for five years from the date of purchase. Be aware, though, that these rules are specific to traditional gift cards and do not apply for prepaid debit cards or promotional rebate gift cards.

Gift Card Scams

Unfortunately, scams are a byproduct of our society and are a common threat — even with gift cards. Every year it’s a new scam and this year is no different.

Smishing: The new trend with gift card scams comes in the form of “smishing,” otherwise known as unsolicited spam text messages sent to cell phone users.

If you receive a text message congratulating you for wining a gift card contest you didn’t enter, delete it immediately. Smishing scams typically direct you to a website where they’ll ask you to enter your personal information and credit card details in order to claim the free gift card prize — don’t fall for it.

Trojan Horse: This scam targets gift cards that are hanging on an open rack inside of a store.

Thieves will record the numbers on the back of the cards closest to the front of the wrack and later use this information to call the toll free number to verify the value of the card. This scam is more prevalent during the holiday season because thieves know you’re most likely buying the card as a gift and won’t actually give it away until December 25th.

This gives them plenty of time to drain the funds before you ever realize the card has been compromised. To avoid becoming a victim of this scam, only purchase gift cards that are held at or behind the register, or are in clear sight of security cameras.

Gift Card Discount Deals

If you cringe at the thought of paying retail and are looking to purchase discounted gift cards, there are a couple of options for you to consider.

Seasonal/Holiday Sales Promotions: Many businesses, restaurants, and retail stores run special discounts on gift card purchases, especially during the holidays.

Some retailers will also run special promotions that include free gift cards with purchase, or special bundles that include discounted gift cards as part of the package.

Discount Gift Card Sites:  There are a number websites dedicated to trading and selling unwanted gift cards from other consumers, often with discounts ranging anywhere from 5% to 30% depending on the popularity of the card.

Stick to the more established sites like Plastic Jungle, eBay, and GiftCards.com, who all provide some sort of fraud or purchase guarantee. Avoid sites that don’t have a clear guarantee or fraud policy.

Sites like Craigslist are often filled with scammers and even though they to do their best to flag and report scams when they happen, they don’t offer fraud protections or guarantees in the event you fall victim to a scam.

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