How Gift Card Reform Affects You


Gift cards have become an increasingly popular holiday gift, thanks in part to their flexibility and convenience.  However, credit experts say they aren’t the perfect holiday present.

"Gift cards are easy to give, but they are also easy to forget. They may hide in your wallet or drawer for a long time," says Bill Hardekopf, CEO of

Fortunately, this year, thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, new regulations are being put in place to protect the money consumers put on gift cards.

“The CARD Act helps preserve the value of the card so that fees can't erode the value of the card before they are used," Hardekopf says.

Here’s a breakdown of how the CARD Act affects gift cards, just in time for the holiday season:

  • CARD puts limits on expiration dates. The money on your gift card will be good for at least five years from the date the card is purchased. Any money added or loaded onto the card after the initial purchase of the card must also be good for at least the next five years.
  • CARD lets you request replacement cards. If your gift card expires and there is unspent money still on it, you can request a replacement card at no charge. You may, however, still be charged a fee of $4 to $8 to purchase or activate the brand new card.
  • CARD prevents retailers from charging dormancy fees for unused cards. The law bans dormancy, inactivity and service fees on gift cards unless there has not been any activity for 12 months, and as long as the issuer has clearly disclosed all fees on the gift card’s packaging. If these parameters are followed, consumers can only be charged one fee per month. Check any gift cards you received during the holidays last year. “If you received a card last December, you could soon start paying a dormancy fee,” Hardekopf says.

According to Hardekopf, these regulations apply to both “closed-loop” gift cards, which are those offered by specific retail stores, merchants or restaurants, and “open-loop” cards, which are prepaid cards branded with the Visa, American Express, MasterCard or Discover logo.

One category of cards that the reform does not regulate is rewards, loyalty or other promotional store cards. These payment alternatives are still subject to varying state-by-state legislation. The other caveat is that, despite the fact that all regulations officially went into effect Aug. 22, Congress passed an amendment in July that gave issuers until Jan. 31, 2011 to get noncompliant gift cards off the shelves.

To avoid buying a subpar card, Hardekopf suggests patronizing merchants that you trust or stores that are known to be in good financial standing. You should also ask to read the fine print of a store’s gift card policy to determine all the fees associated with the card before you make your purchase.

What stores are selling consumer-friendly gift cards? Check out this MainStreet article to find out which retailers offer the best digital gift cards!

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