Gift cards make great gifts for just about anyone. However, some gift cards come with fees that can eat into their value. These fees can include purchase, activation and dormancy fees.
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Cost of the Gift Card
Gift Cards are very popular and provide a convenient way for consumers to purchase products or services without paying cash. They are also a great option for holiday shopping or birthday gifts, as they take the guesswork out of what to buy.
A gift card is a prepaid stored-value money card that can be used as an alternative to cash for purchases within a specific retail chain or related businesses. They are often promoted by retailers and branded to promote the store or brand.
Generally speaking, gift cards bearing the logo of a financial network such as Visa, Discover or MasterCard charge an activation fee, which is typically around $3 to $6, while store branded cards do not. Some of these cards also charge monthly inactivity fees, while others do not.
Activation Fees
Activation fees are one of the first costs associated with gift cards. These are typically imposed by the sponsoring bank that issues the card. In the case of Target gift cards, this could mean either the retailer’s own bank or a Delaware company that specializes in offering prepaid Visa cards on behalf of numerous retailers.
Moreover, gift cards may be subject to various other charges. For instance, lost or stolen cards may be replaced for a fee. Other possible charges include reload fees and service fees. These are essentially monthly fees charged to keep the balance on the card active.
Store gift cards (good only for a specific retailer) generally do not have these charges. Additionally, reload fees for these types of cards are usually lower than those for general-use prepaid Visa and MasterCard cards. These are the main reasons why many people prefer store gift cards to generic ones. Moreover, they are also good for gifts to children and teens who often don’t have the disposable income to afford expensive gift cards.
Activation Period
Gift cards are popular as gifts and can be used to purchase items at specific stores or online. However, not all gift cards are created equal. Some are limited to a single retailer while others — such as Visa, MasterCard or American Express — can be used in any store that accepts those cards. Some even have reloading options.
In some cases, gift cards require activation before being used. For example, a plastic Visa gift card that is shipped via mail requires activation in person at the store that issued it. This is usually done in the form of a customer-assisted approach where the cashier will activate the card and provide detailed terms and conditions to the customer.
A common issue with gift cards is that they may stop working after activation. This is usually due to an error in the processing of the card by the bank or the merchant. This can often be corrected by calling the customer service department.
Inactivity Fees
Many gift cards come with activation fees and inactivity fees that deplete the balance of the card over time. Fortunately, because of federal and state laws, most small and independent retailers do not charge these types of fees. The CARD Act requires that gift cards and certificates last at least five years, prohibits expiration dates, and limits dormancy fees (fees charged when a card is not used). It also requires that sellers display on the front of the card or certificate, in at least 10-point type, a statement describing the fee amount and frequency, whether the fee will be assessed monthly or annually, and a toll-free phone number and website, if maintained.
However, the law does not cover prepaid network-branded cards that are redeemable across multiple merchants or banks, prepaid telephone cards, promotional and rewards cards, or cards linked to bank accounts or usable at different unaffiliated retailers. It also does not apply to certificates for services such as spa treatments or admissions to venues or events.