Did you receive a gift card during the holiday season? If so, it’s important that you understand your rights. While most gift cards cannot be redeemed for cash, federal law does provide you with some consumer protections. Many states offer you additional rights.
Federal law provides the following consumer protections:
- Limits on expiration dates. The money on your gift card will be good for at least five years from the date the card is purchased. Any money that might be added to the card at a later date must also be good for at least five years.
- Limits on fees. Generally, fees can be charged only if you haven't used your card for at least one year. You may be charged one fee per month after the first year. These restrictions apply to fees such as dormancy or inactivity fees for not using your card, fees for using your card (sometimes called usage fees), fees for adding money to your card, and maintenance fees.
- Be aware that you can still be charged a fee to purchase the card and certain other fees, such as a fee to replace a lost or stolen card. Make sure you read your gift card disclosure carefully to know what fees your card may have.
In California, most gift cards cannot have any expiration dates or service fees. In this respect, California law is more consumer friendly than the federal law. However the California law does not apply to multiple retailer gift cards such as mall gift cards or bank gift cards including Visa and MasterCard gift cards. For those types of gift cards, only the federal law would apply.
The California gift card law is complex and does not apply to all gift cards. There are numerous exceptions to the California gift card law. One unusual benefit of the California law is that a gift card with a remaining balance of less than $10 is redeemable in cash for its remaining cash value.
Many other states also additional consumer protections. The National Conference of State Legislatures maintains a comprehensive list of state gift card laws.
Here are some practical tips for using your gift cards:
- If a gift card is lost or stolen, its value may be lost. Therefore, you should treat the gift card like cash. It’s a good idea to use your gift card as soon as you can. That way, if you should misplace or forget about your gift card, you will not lose its value.
- Once you have spent the entire value on the gift card, you may still want to keep it in case you need to return merchandise that you have purchased with the card. Some retailers will only allow you to return merchandise when you present the original form of payment.
- With some retailers filing for bankruptcy, you should be aware of the rules governing gift cards in a bankruptcy proceeding. A gift card from a retailer that seeks bankruptcy protection may lose its value. However, the holder of the gift card may have a claim against the bankruptcy estate. Sellers that file "Chapter 11" (reorganization) bankruptcy intend to stay in business, so they typically will ask the bankruptcy court for permission to honor gift cards in an effort to maintain good customer relations. If the bankruptcy court does not allow gift cards to be honored, or if the seller files "Chapter 7" (liquidation) bankruptcy, holders of gift cards are creditors in the bankruptcy case.
If you have any questions or complaints about gift cards, please use the orange or blue buttons at the top of the page to let us know.