Gift Card Expiration Laws: What You Need to Know
Gift cards have become an increasingly popular gift-giving option over the past couple of decades. According to the National Retail Federation, nearly 50% of all shoppers planned to buy gift cards during the 2021 holiday season. The convenience and flexibility of allowing the recipient to choose their own purchase makes gift cards an appealing choice for many givers.
However, one downside to gift cards that consumers often complain about is expiration dates and fees. If a recipient fails to use their gift card within a set period of time after purchasing or receiving it as a gift, the card may expire and the money is taken back by the retailer. Additionally, companies may charge service fees or inactivity fees that reduce the card's balance over time.
With billions of dollars on unused gift cards sitting around in wallets and drawers, the issue of gift card expiration and fees has come under scrutiny. Consumers argue that companies shouldn't be able to take back the prepaid value on the cards that was already paid for. On the other side, businesses don't want to indefinitely honor gift cards that go unused.
Over the past decade or so, there have been some important laws passed, both on the federal and state level, that regulate gift card expiration and fee policies. This article will dive into the key regulations that affect your gift cards.
Federal Law on Gift Card Expirations
On the federal level, there are two main laws that impact gift card expiration dates and fees - the Credit CARD Act of 2009 and the FTC Gift Card Rule.
The CARD Act of 2009
The most significant federal law governing gift cards is the Credit Card Accountability Responsibility and Disclosure Act, known as the CARD Act. This law, which went into effect in 2010, provides several protections relating to gift cards, store gift certificates, and general purpose prepaid cards.
Some key provisions of the CARD Act relating to expirations and fees include:
- Gift cards cannot expire for at least 5 years from the date of purchase or last load of funds.
- No inactivity fees can be charged until after at least 1 year of inactivity.
- Dormancy, service, or other fees cannot be charged on gift cards except under certain conditions.
- Expiration policies and fees must be clearly disclosed on the gift card or packaging.
The CARD Act provisions on gift cards apply to physical gift cards as well as e-cards. One exception is loyalty, award, or promotional gift cards which can have shorter expirations.
By restricting expirations and fees, the CARD Act removed some of the most common frustrations consumers faced with gift cards. But it provided even further protections through the FTC's additional gift card rule.
FTC Gift Card Rule
In addition to the CARD Act, the Federal Trade Commission (FTC) implemented its own Gift Card Rule in 2010 which provides further safeguards for consumers.
Under the FTC Gift Card Rule:
- Gift cards cannot expire for at least 5 years.
- Inactivity fees can only be charged after at least 1 year of inactivity.
- Any fees must be clearly disclosed on the gift card or packaging.
- No more than one fee can be charged per month.
- Fees must be reasonable and proportional to the issuer's costs.
- Partially used gift cards cannot expire.
Taken together, the CARD Act and FTC Gift Card Rule provide considerable protections around gift card expirations and fees at the federal level. However, states are also able to legislate in this area...
State Laws on Expiration of Gift Cards
In addition to federal law, some states have enacted their own laws relating to gift card expirations and fees. State laws can provide additional protections beyond the federal rules.
California Gift Card Law
One example is California's gift card law, considered one of the strongest in the nation. Key provisions include:
- Gift cards cannot expire.
- No inactivity fees or other service fees can be charged.
- Remaining balances below $10 can be redeemed for cash.
- Improperly expired cards with balances must be reactivated upon consumer request.
This law, which went into effect in 2008, essentially bans all expiration dates and fees on gift cards issued by retailers doing business in California.
New York Gift Card Law
Meanwhile, New York State prohibits any expiration dates less than 5 years and fees except for an initial issuance fee. After 5 years, a dormancy fee can be charged but the consumer must be given advance notice to use the card prior to assessment of the fee.
Strategies for Consumers on Avoiding Expired Cards
As suggested by legal experts, while federal and state laws provide important protections around gift card expirations, you can also take steps as a consumer to get the most out of your gift cards and avoid losing value due to expired or forgotten cards:
- Use gift cards promptly if possible instead of saving for an indefinite future treat. You can even use a small balance card for a portion of a larger purchase.
- Before buying a gift card, check the policies printed on the back or the retailer's website for details on expiration and fees.
- Set reminders on your phone to use your gift cards while they still have a balance.
- Check your wallet, purse, and any stashes where you store gift cards occasionally for any unused cards.
- For major retailers, you can check online to see if you have any outstanding balances remaining on purchased gift cards.
- If you have a card that has expired or assessed fees, check with the retailer about getting the balance reinstated. Make sure to check state laws on the rules about expired cards and fees as well.
Frequently Asked Questions
What are the rules on gift card expiry?
The federal CARD Act and FTC Gift Card Rule state gift cards cannot expire for at least 5 years. Some states like California ban expiration entirely. Cards must disclose expiration policies.
Can a gift card expire if you never used it?
Yes, gift cards can expire per the policy disclosed, but federal law prohibits expiration less than 5 years from purchase or last reload, even if never used.
Can a gift card expire after 2 years?
No, federal law requires at least a 5 year expiration period, so a 2 year expiry would violate regulations. Some states ban expirations under even longer periods.
Are all vouchers valid for 5 years?
Store vouchers and coupons have different rules than prepaid gift cards. Vouchers can often have shorter expiration dates, depending on state laws. Gift cards must follow federal and state card expiration rules.
Conclusion and Key Takeaways
According to legal experts, the popularity of gift cards often runs counter to the problem of expired and forgotten card balances. Federal and state laws now provide much stronger protections against cards prematurely expiring or losing value through various fees. As a consumer, make sure you understand the laws in your state and take proactive steps to use gift cards while they still maintain a balance. With billions of dollars in unused gift cards out there, don't let forgotten funds go to waste!
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