Buying a gift card is easy, and while legislation has eliminated a number of the gotchas associated with these presents, some drawbacks remain. So do your homework before you spend any money on gift cards.
Consumers will spend $28.8 billion on gift cards during the holiday season, according to an estimate by the National Retail Federation. But shoppers don't get all they paid for—certain store policies can erode the value.
If you plan on giving a reloadable gift card or one that's not marketed as a gift card specifically, pay close attention to the card's terms and conditions to make sure the person you're giving it to doesn't get hit with fees that lower the overall amount they get to use toward a purchase. Bank-issued cards are convenient (you can use them almost anywhere), but they come with fees. For example, you could be charged a monthly fee after 12 months of inactivity.
Bottom line, if you're set on giving gift cards this holiday season, retail store cards are the way to go because they usually have little or no fees attached to them. And it's always a good idea to make sure the person you're giving one to actually likes to shop at the store the gift card is for.
Over the years, Consumers Union, the advocacy arm of Consumer Reports, has pushed for limits on gift-card fees and expiration dates. Consumers Union supports a new bill in Congress that would ban gift card expiration dates as well as non-use fees.