Posted on 10/18/2006 9:32:22 AM PDT by Diana in Wisconsin
It has taken a few years, but state legislatures are catching up with glitches in the popularity of gift cards, the quick-fix solution for those too befuddled or time-pressed to find the perfect present.
At least 25 states have strengthened their consumer protections for the credit-card-sized scrip that more Americans now give in lieu of a hand-picked, boxed-and-bowed gift, according to the National Conference of State Legislatures. U.S. shoppers are expected to spend as much as $72.8 billion in 2006 on gift cards. But only in three states can consumers be guaranteed that their gift cards will be worth full value when they go to spend them at a store, restaurant or online.
Around the country, expiration dates and “processing fees” are the bane of gift card users. Shoppers might find the value of their cards eaten away by fees charged by retailers and banks – or stripped to zero if too much time elapses between when the cards were purchased and redeemed.
Starting in 2004, lawmakers in many states began responding to consumer complaints by introducing bills that would have forbade all fees and made the cards’ value perpetual. But that type of legislation rarely survived, and today only Connecticut, Montana and Rhode Island prohibit all fees and expiration dates. California, which started the movement with its gift card law of 1996, prohibits expiration dates but allows fees in certain circumstances.
More typical is Kansas’ new law, an example of the compromises that lawmakers and business groups often reach on the gift card question. Sponsored by state Rep. David Huff, a Kansas City-area Republican, the idea for the law came in 2003, after one of Huff’s constituents bought his wife a $100 gift card to a spa and the card expired before she could redeem it, meaning the money was lost.
Huff introduced a bill that would have prohibited gift cards from expiring and taken effect on July 1, as with most Kansas legislation. But after lobbying from retailers’ groups, the final bill only guarantees that cards will be valid for at least five years after purchase, and involve no fees within one year. Also, the new law won’t take effect until Jan. 1, 2007, after this year's holiday shopping season.
“They were not that enthused,” Huff said of businesses’ reaction to the bill.
Huff said part of the opposition came from businesses that count on a certain number of gift cards to be forgotten under Christmas trees or to flutter out of birthday cards. Unredeemed cards can add up to a lot of pure profit: Home Depot, the nation’s second-largest retailer, announced in 2005 it had made $43 million from gift cards it didn’t expect to be redeemed. About 10 percent of the value of gift cards in the United States goes unredeemed each year, said Dennis Moroney, an analyst with the financial research firm TowerGroup.
There are two main types of gift cards: store-issued cards that work like cash when redeemed at cash registers or online, and cards issued by banks and credit businesses such as Visa or American Express that can be redeemed anyplace that takes credit cards.
Retailers’ groups say that the fees go to third-party vendors who handle and process the cards, and complain that the variety of different state regulations can confuse consumers. Advocates for bank-issued gift cards say fees and limited-use dates help keep the cards’ overall costs down for consumers. Unlike retailers’ cards, banks and credit card companies charge an upfront fee for gift cards in addition to the value buyers add.
Some large retailers, including Wal-Mart, Target and The Gap, voluntarily don’t charge service fees or impose expiration dates on their gift cards. Chain restaurants also avoid the restrictions, according to the National Restaurant Association; even if restaurant patrons wait a few years to redeem a gift card, they tend to spend more money than the card is worth.
Home Depot, the nation’s second-largest retailer, announced in 2005 it had made $43 million from gift cards it didn’t expect to be redeemed.
Retailers are employing the old "rebate" trick here. It is a type of fraud.
Perhaps if stores or the banks handling the cards want fees, these fees should be charged up-front - that way the purchaser gets forewarned about them. Thus, a forever-valid $50 card would cost $55, with the extra $5 to handle all these claimed future costs. It would dampen their sales, but bring back some honesty to how they are implemented.
A better idea would be for private citizens, acting one by one, to bring the sick culture of non-stop gift-giving to a screeching halt. Other than parents and other adult relatives giving toys and such to children, and children reciprocating with hand-made creations, the whole thing should stop. Between bridal showers, wedding gifts, baby showers, Christmas presents to a huge array of people whom one doesn't know well enough to know what they'd like, birthday gifts, it's all completely out of hand. It's being fueled by marketers of mountains of junk that nobody needs. The symptoms are the proliferation of gift cards, "re-gifting", and mountains of consumer debt made higher by all the pointless gift-buying.
My holiday gift-giving is limited to something home-baked or inexpensively purchased (like $10 max) that will really be enjoyed and used, for ONE long-time friend and neighbor, and one practical and clearly wanted item for my 84 year old father who suffers from Great Depression-induced inability to buy himself anything nice even though he can easily afford to. I simply refuse to participate in the gift-exchange mania.
Lost?
That money was stolen.
"I simply refuse to participate in the gift-exchange mania."
I agree, 100% After years a pleading & begging we've finally gotten both sides of our family to knock it off.
This will be our first gift-free Christmas with my Aunt and her kids and grandkids. I can't wait!
I do give gifts to friends and immediate family, but a lot of those are homemade, or something hunting-related for my husband (which reaps the added benefit of a game-filled freezer.)
I agree. That card should not have been expiring. For such an extravagent cost, it should never have had an expiration date.
At the very least, it's not economically beneficial.
I know it seems crass to some but why buy a $100 gift card from xyz retailer when you can give cash? I mean the level of thought up from cash to a gift card seems minimal to me. You can call cash an all purpose gift card and way more versatile too.
What
A
Blast!!
We have so much fun and laugh our assets off.
Bah Humbug :)
Why? Most checks drafted from business accounts have an expiration date - so do money orders.
Gift cards are a godsend to american commerce as it makes the our buying much more efficient. Rather than wasting resources by purchasing unwanted items as gifts we are able to spend money on things that we really want.
Companies are not going to want to issue gift cards that they have to keep on the books for years on end. The accounting, tracking and reporting costs will make the cards unprofitable.
Laws like this are just going to kill the goose that laid the golden egg.
Therein lies the problem.
Business consider the purchase of gift cards as a merchandise purchase. I can see how they would have problems with their IT systems if they book the purchase in one year, but the customer doesn't redeem the card until the next fiscal year. How do you book the transactions to the general ledger?
They should not consider the purchasing of these cards as a merchandise purchase. They should consider it a conversion of cash to a card that is only usable in their own stores, and show no effect on their general ledger until the card is actually used to purchase true merchandise.
This way, they are providing a service to the customer, with that service leading to purchases sometime in the future.
-PJ
The only thing I would support is a law that requires stores to tell consumers up front if the card they are purchasing for $25 will be worth less than $25 when used to purchase goods.
I'll take a gift card any day... hot item on ebay, they sell pretty much instantly. My last $50.00 gift card went for 47.50 and a $10 coffee card went for $8.99.
I'll take the cash.
Agreed. At one department at my office, whenever somebody has a birthday everybody else has to kick in $10 for a gift card. The net result over a year is that everybody ends up exactly even, minus the significant deadweight loss. Pointless and silly. Like you, I give gifts to a small number of people (and often not on designated days), and it actually means something when I do.
WOW
What do they do with the cards that are never redeemed?
If the gift receiver never redeems the card, then it is like stuffing cash under your mattress. The store loses nothing, the gift purchaser still has the satisfaction of giving a gift, and the gift receiver can still redeem the card until the store either goes out of business, ends the gift card program, or upgrades their system to the point where the cards are no longer readable by their technology.
The only real cost to the store is the materials cost of the gift card, and whatever wear and tear there is for encoding the card with value. I would consider that an SG&A expense, the cost of doing business.
-PJ
Too bad the post office does not offer a "money card" much the way they offer money orders.
Why not just give cash?
A $50 home depot gift card is the same as $50 in a home depot holiday card?
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