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New Gift Card Rules for Expiration and Service Fees

Federal Reserve Announces Rules to Protect the Value of Gift Cards

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Have you ever tried to use a gift card a few months after receiving it only to find out the balance has been dramatically reduced because of fees? That’s because gift card issuers often charge monthly service and inactivity fees on gift cards that aren’t used within a certain period of time. Sometimes, unused gift cards are even cancelled if they aren't used within a certain period of time. These practices will soon come to an end.

On March 23, 2010, The Federal Reserve issued new rules to help consumers get the full value of their gift cards.

Gift Card Rules for Expiration and Fees

Part of the Credit CARD Act of 2009 required the Federal Reserve to come up with rules for gift cards. After receiving feedback from consumers, consumer groups, card issuers, industry commenters, and even a state attorney general, the FTC proposed these rules:

  • Gift cards can only expire five years after the date the card was purchased or the date money was last loaded onto the card. If the card and the underlying money expire at different times, the card issuer should make it known which date applies. You should not be charged a fee to replace your card if it expires before the underlying funds expire (less than five years).
  • Issuers can only charge an inactivity fee on a gift card if the card hasn’t been used in one year. Only one service charge* or inactivity fee can be charged per calendar month.
  • Finally, consumers must be made aware of all gift card fees. The expiration and fee information needs to be displayed on the card and the cashier selling the card should explain the disclosures before selling the card.

*Service fees may include fees for certain transactions like a balance inquiry, balance reload fee, or ATM withdrawal fee.

Gift Card Rule Exclusions

These rules apply to retail gift cards and Visa, MasterCard, American Express, and Discover gift cards. It does not include reloadable phone cards, cards given in lieu of an admission ticket, business gift cards, or gift cards purchased for business use.

State Gift Card Rules

The Federal Reserve says that some states already have rules that limit fees on gift cards and restrictions on gift card expiry. However, most of these laws only allow to store-branded gift cards and not those bank gift cards like those from American Express and Visa. The state law is effective when it provides greater protection than the Federal law.

Effective Date

These rules take effect August 22, 2010 and will apply to gift cards sold after that date.

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