Credit CARD Act Takes On Store-Bought Gift Cards

Written by Curtis Arnold
Posted On: August 11, 2010

The final set of financial regulations to take effect under 2009's Credit CARD Act kick in on August 22, 2010. Many gift card transactions are clearing on the same networks as already-regulated debit and credit cards. Therefore, lawmakers seized the opportunity to pull gift cards under the same tent as other credit and debit accounts. The new rules for gift cards explain fee structures and extend expiration dates.

New Rules Revive Zombie Gift Cards

Before a consumer outcry stirred lawmakers to action, some gift card issuers set short redemption windows or adjusted expiration dates at will. New rules require card issuers to keep gift cards active for at least five years. In addition, the Credit CARD Act now requires stores to transfer unredeemed gift card balances to replacement cards at no charge. Losing a gift card no longer means losing its value, as long as you can provide the card number and proof of activation.

Credit CARD Act Clarifies Gift Card Fees

Even with far-fling expiration dates, gift card issuers discovered that they could raid consumers' balances by assessing a variety of service fees. For some store cards, shoppers might have to pay a fee to load a card, a fee to redeem a card, and even a fee for failing to use a card in a given month. Gift recipients often learned the hard way that a card's value had been depleted by fees. New rules force card issuers to disclose any permitted fees in plain language at the time of purchase, giving recipients a one year grace period before issuers can begin charging monthly fees.

Distinguishing Gift Cards from Promotional and Prepaid Debit Cards

The Credit CARD Act left a pair of loopholes that could still affect the way you use plastic. Many reloadable debit cards now offer direct deposit and other features that make them more closely resemble checking accounts. When not specifically branded as gift cards, these products don't follow the same rules on fees and expiration dates as other prepaid cards governed by the Credit CARD Act.

Likewise, many companies have replaced promotional rebate checks with pre-loaded debit cards. Instead of adhering to the same rules as store-bought gift cards, these promotional debit cards can carry their own terms and conditions. As a rule of thumb, redeem promotional gift cards as soon as possible for the full face value of each card.

Editor's Note:?? The Federal Reserve Board issued a rule on August 11, 2010 that will extend the??deadline for including related disclosures on gift cards and general use prepaid cards.?????? Providers now have until January 31, 2011, to issue cards that have the new disclosures on them.?? However, consumers will still be protected under the new rules as of August 22, 2010.