Gift cards often come with catches

The tradition of giving is writ large on the holiday season. Sadly, you also have to check the fine print.

Especially when it comes to the gift cards that Americans love to bestow. More than 95 percent of us have given or received at least one, and in 2007 more than 60 percent of people surveyed said they planned to give a card that year. Sales of cards were predicted to reach $87 billion this year, and according to Consumer Reports, they are the most desired gift among women.

But some of the cards come with sharp, Grinchy edges — early expiration dates or monthly fees that kick in when the card isn't being used and that can drain down its value considerably over time. That's led to their reputation as the gift that keeps on taking.

Fees are more common among bank-issued cards than retailer cards, although American Express dropped its fees in October. It had previously charged $2 a month on cards that were more than a year old. Once an iCard Visa gift card turns six months old, the company imposes a $25 charge every six months — and it takes some hunting to find that information on the Web site.

Bank cards offer consumers the flexibility of shopping at a wider range of retailers, but at the risk of wiping out the value of the card if it's not used quickly. A survey by Consumer Reports found that more than a fourth of the people who receive gift cards for the holidays do not use them within a year.

These fees are levied on top of the initial purchasing charge on the bank-issued cards. Banks must make their money from fees on the card itself, while retailers make their money from the sales of their products. It's understandable for banks to urge quick use of the cards. Unused gift cards throw off their books and predictions of future expenses, like a gigantic version of having an uncashed check confusing the balance of your checking account. But it goes too far when consumers, both gift giver and recipient, lose the value of the card.

Gift cards of any kind can be a good deal for sellers simply because so many people never get around to using them. The Tower Group, a financial services research firm, estimates the current "lost value" of those unused cards at $5 billion — a big reduction from two years ago, when it was close to $8 billion. In 2006, retailer Best Buy reported a $43-million boost from cards that were unlikely to be used. (Best Buy cards do not expire or have maintenance fees.)

California already prohibits expiration dates or fees on many gift cards — but not on the bank-issued cards. Last month, the Federal Reserve proposed nationwide restrictions on the cards. They would not be allowed to expire for at least five years. Maintenance or "dormancy" charges would not be allowed unless the card is unused for 12 months, and clearer notification about any fees would be required. The regulations are expected to take effect late next year, a true gift for the holiday shopper.

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