Humberto Cruz: Don't be tripped up by gift card rules

It’s not exactly a gift they’ll remember you by: A general-purpose gift card that can be used in many stores but can cost $6.95 above face value and start charging fees as high as $4.95 a month after six months.

On top of that, some stores won’t accept the card for part of a purchase if the price is higher than the card’s remaining value. I’m not surprised that by the time these cards expire -- some do in a year or less -- about 10 percent of their value is never used.

That’s a ton of money to waste -- a staggering $400 million -- considering Americans will spend nearly $4 billion this year on these cards, which also go by the name of bank or cash gift cards and are mostly issued by MasterCard, Visa and American Express.

“Consumers clearly like the convenience and flexibility of general-purpose gift cards but also are largely unaware of their costs and risks,” said Stephen Brobeck, executive director of the Consumer Federation of America (CFA), a not-for-profit consumer advocacy group.

Only one-third of 1,004 Americans responding to a survey commissioned by the federation and the National Association of Consumer Agency Administrators (NACAA) knew these gift cards cost between $3.95 and $6.95 above face value. Just 54 percent knew that six to 12 months after purchase, some start charging a monthly fee. (In September, American Express eliminated monthly charges on all its general-purpose gift cards). Only 39 percent realized some stores do not permit splitting payment for a purchase between a general-purpose gift card and some other payment method.

Also, only 41 percent knew that, effective next August, a federal law will not allow these cards to charge fees if they have been used in the previous 12 months.

“Gift cards will be a popular gift this holiday season and it is vital that consumers know the rules to get the best for their hard-earned money,” said Elizabeth Owen, president of NACAA, which represents consumer protection agencies at all government levels.

To help consumers understand these rules, the CFA and NACAA have put together a brochure on gift cards to be distributed to consumer agencies and, through American Express, to major retailers. A copy is available on the federation’s Web site, www.consumerfed.org. Click on What New at CFA and look for the brochure under Educational Resources.

The brochure’s key recommendations are to pay attention to the card’s expiration date and to any charges, including both the initial purchase price and any monthly fees, and to spend all the card’s value as soon as possible, preferably within six months.

The brochure also lists differences between general-purpose gifts cards and the more prevalent store-brand gift cards. The latter can be used only at a particular store or chain and could become worthless if the issuing company goes bankrupt. On the plus side, they typically sell at face value, do not charge monthly fees and can be used for “split payments.” For example, if an item costs $50, you can use a $25 store gift card and pay the other $25 with cash or credit card. With general-purpose gift cards, each store’s policy determines whether the cards will be accepted for split payments.

“Both my mother and my wife have complained about that,” Brobeck said of stores not accepting split payments. His advice: Speak to the manager because some stores do allow split payments but the salesperson helping you may not be aware of the policy.

Send questions or comments to Humberto Cruz at AskHumberto(at)aol.com or c/o Tribune Media Services, 2225 Kenmore Ave., Buffalo, NY. 14207.