Hidden fees: Do gift cards take as much as they give?

According to the Federal Trade Commissions FTC Gift Card Message

There are two types of gift cards.

• Retail gift cards (e.g. Target, Walmart, Chilli’s, etc.) may have expiration dates or a fee for inactivity that sometimes is called a “dormancy fee”.
• Bank gift cards (like VISA, MasterCard, Discover, etc) can be used at any location accepting cards from their network, but you’ll probably end up paying more fees for activation, maintenance, and/or transactions on bank gift cards than on retail gift cards (e.g. Target, Walmart, Chilli’s, etc.)

The FTC suggests that you take the following measures to protect yourself and/or the gift card recipient:

• “Buy from sources you know and trust. Avoid buying gift cards from online auction sites, because the cards may be counterfeit or may have been obtained fraudulently.”
• “Read the fine print before you buy. If you don’t like the terms and conditions, buy elsewhere.”
• “Ask about expiration dates and fees when you’re buying a card. This information may appear on the card itself, on the accompanying sleeve or envelope, or on the issuer’s website. If you don’t see it, ask. If the information is separate from the gift card, give it to the recipient with the card to help protect the value of the card.”
• “Consider purchase fees: Must you pay a fee to buy the card? If you buy the card online or on the phone, is there a fee for shipping and handling? Does expedited delivery cost more?”
• “Consider fees that may be deducted from the card, including activation, maintenance or transaction fees. It might be embarrassing to give someone a $50 gift card and find out later that fees gobbled up most of the amount.”
• “Inspect the card before you buy it. Verify that none of the protective stickers have been removed, and make sure that the codes on the back of the card haven’t been scratched off to reveal a PIN number. Report tampered cards to the store selling the cards.”
• “Give the recipient the original receipt to verify the card’s purchase in case it is lost or stolen.”
• “Consider the financial condition of the business and whether it has filed for bankruptcy.”

For more information about gift cards and how to use them, visit the FTC’s gift card web page at
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt010.shtm

Read about new Gift and Credit Card federal laws going into affect in this year (2010).  According to the FDIC, “Under the new law, gift cards and similar cards cannot expire within five years from the date they were activated unless the expiration date is clearly disclosed. The law also generally prohibits an inactivity fee on gift cards except in certain circumstances, such as if there has been no transaction for at least 12 months.“

Debit card risks that everyone should know about

According to the Federal Trade Commission your liability under federal law for unauthorized use of your ATM or debit card depends on how quickly you report the loss.

If you report  that your ATM or debit card is missing before it’s used without your permission, the Electronic Fund Transfer Act (EFTA) states that  the card issuer can’t hold you responsible for any unauthorized transactions.

If unauthorized transactions occur before you report it to the card issuer, your liability under federal law will vary depending on how quickly you report the loss.

According to the Federal Trade Commission:  “If you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for unauthorized use. However, if you don’t report the loss within two business days after you discover the loss, you could lose up to $500 because of an unauthorized transfer. You also risk unlimited loss if you fail to report an unauthorized transfer within 60 days after your bank statement containing unauthorized use is mailed to you. That means you could lose all the money in your bank account and the unused portion of your line of credit established for overdrafts. However, for unauthorized transfers involving only your debit card number (not the loss of the card), you are liable only for transfers that occur after 60 days following the mailing of your bank statement containing the unauthorized use and before you report the loss.”

For more information, visit the Federal Trade Commission’s Credit, ATM and Debit Cards web page