What the New CARD Act Means To You and Your Gift Cards

At some point you may have held a gift card or pre-paid card and somehow found out that the value on the card mysteriously decreased without you spending it, that is what ‘hidden fees’ does to you. Hidden fees are just one of the many reasons people consider(ed) the card industry to be ‘anti-consumer’.

In the wake of these claims and instability in the Industry, new federal credit card rules were passed in late August 2010 to help regulate these problems. The CARD Act – Credit Card Accountability Responsibility and Disclosure Act of 2009 is a list of provisions by congress aimed to help people feel more comfortable with the idea of buying and using these cards.

According to the National Retail Federation, up to $85 billion in Gift Cards are sold each year and more than $6 billion of that goes unused. These numbers are so high because people either don’t patronize the stores they have the gift cards to or because they simply don’t feel confident holding these cards.

The new laws kicked into effect on Aug. 22, 2010 and every gift card purchase after that date must comply with the provisions of the law. The following are the key provisions of the law:

  1. No more Hidden Fees. For one year, inactivity, dormancy and service fees cannot be imposed under the new CARD Act. This provision applies to Gift certificates, gift cards and prepaid cards. However, if there is no activity on the card for a whole year, the fees can be imposed after that. Even in the situation that a fee is imposed, only one fee can be imposed per calendar month.\
  2. Expirations. According to the new CARD Act, even though gift cards can expire, the money used to buy or reload a gift card cannot expire and must be useable for at least five years. During the five year period, the card issuers must either replace expired cards at no charge or refund any balance.
  3. The gift cards are required to display a contact number and/or websites of the issuer.
  4. Disclosure Requirements. The rules of the CARD Act require the issuer of the card make full disclosure of the permitted expiration dates, inactivity/dormancy fees and how card holders can obtain information about the issuer should they need to reload or report a missing card. The provisions also require that these disclosures be made on the cards.

While these provisions help instill confidence in card users, it is important to note that not all gift cards are covered by the laws. They only apply to gift certificates, gift cards and prepaid cards. They do not include most e-cards or payment codes.

Another key thing to keep in mind is that some cards still don’t carry full disclosures. One of the provisions of the new CARD Act is that issuers of the cards must disclose information including fees, expiration dates and contact information on the cards. While the new laws have gone into effect since August 2010, the provision allows for a grace period on disclosures up till January 31st, 2011 for gift cards produced before April 1. The grace period comes in a bid to prevent gift card and prepaid card issuers from having to destroy up to 100 million cards that had been produced prior to the CARD Act.

Kwame Kuadey is the CEO and Founder of GiftCardRescue.com, a site for selling unwanted gift cards for cash. Kwame is also editor of Gift Card Blogger, a blog about discounted gift card deals and more.

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Last Edited: February 10, 2012 @ 11:12 am
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