By PATRICIA SABATINI
Pittsburgh Post-Gazette Shoppers are expected to shell out some $25 billion for gift cards this holiday season, making the little pieces of plastic cash the No. 1 present for the sixth year in a row.
The best news is that gift cards have become more consumer-friendly. While a few pitfalls remain, most issuers have dropped monthly fees, expiration dates and other traps that had eaten away at the cards' value and often transformed a can't-miss gift into a booby prize.
In general, retailer cards -- those good at a particular store or chain of stores -- have the simplest terms. Typically, they carry no up-front fees or monthly maintenance fees. And most never expire.
Unlike a few years ago, the vast majority of store cards also are now accepted online. In its just-released annual gift-card survey, Bankrate.com found that cards issued by CVS Pharmacy and TJ Maxx/Marshalls were the only exceptions.
General-purpose gift cards issued by Visa, MasterCard, Discover and American Express generally carry the most fees, although even those cards are getting better.
All charge a fee to buy them ranging from about $4 to $7, a trade-off for the convenience of being able to use the cards anywhere the brand is accepted.
In September, Amex eliminated the $2 monthly maintenance fee it had charged after 12 months of inactivity, but the other issuers still assess the fee. Amex also eliminated the maintenance fee on cards already in consumers' hands.
In the past, the general-purpose cards expired after 24 months. Now, although they carry a "valid through" date, the funds don't expire. Customers who want to use a card after that date must have the balance transferred to a new card, provided at no charge.
While the vast majority of store cards don't expire, a recent Consumer Federation of America survey found some cards that expired in less than a year.
New federal regulations that take effect in August will get rid of those cards. The new rules, part of credit-card-reform legislation passed in May, will require that all gift cards be good for at least five years. They also will prohibit monthly maintenance fees unless the card hasn't been used for 12 months or more.
Most card issuers already are complying with the new regulations -- with good reason. Studies show that gift-card holders typically spend 30 percent more than the card's value when they make a purchase.
"That's one reason retailers did away with all the impediments. They want to make the cards easy to use," said Ellen Cannon, managing editor at Bankrate.com. "In general, gift cards are much more consumer-friendly than they were."
Still, consumers report running into snags.
For one, some retailers won't accept split payments, meaning they won't take the card if there's not enough to cover the purchase even if the customer made up the difference with cash or with another form of payment.
In addition, some cards start assessing a monthly fee in as little as six months after purchase.
The best strategy is to read all the fine print that comes with the card so you know the potential pitfalls.
And use the card as soon as you can. That way you'll reduce the chances of losing it or forgetting about it and possibly getting hit with fees that reduce the card's value. It also reduces the risk of holding a worthless card from a retailer that goes bankrupt.
A recent Consumer Reports survey found that 25 percent of adults still had not used a gift card they received last holiday season.
"If you use it right away, you don't have to think about all the other things" that could go wrong, Cannon said.
The Consumer Federation of America last month released a guide to using gift cards available at www.consumerfed.org. Click "What's New at CFA" and "Educational Resources."
(Patricia Sabatini can be reached at psabatini(at)post-gazette.com.)
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
