Full Notification

Whether you're giving or receiving gift cards this holiday season, new federal rules protect you against the hidden fees and early expiration dates that once cut deeply into their value.

Here are four things you need to know about gift cards and what the new rules do (and don't) cover:
1. Better consumer protection

The new gift card rules that went into effect August 2010 as part of recent federal credit card regulations offer stronger consumer protections.

* Gift cards, certificates and prepaid cards are good for at least five years from the day the value is loaded onto them, unless expiration rules are clearly disclosed.
* Stores that issue the cards can't charge inactivity fees unless the cards aren't used for at least 12 months or the fee is clearly disclosed before the card is bought. Even then, they can only charge one fee a month. These rules will help make sure "your balance won't disappear before you have a chance to spend it," U.S. Sen. Christopher Dodd, D-Conn., explained when the law was moving through Congress.
* Although the card may expire in five years, the money may not. Call and ask the card company to transfer the remaining amount to a new card.


2. Remaining pitfalls

It's important to know the rules of each card you hold and to treat it like cash. But many people tuck gift cards away and forget to use them.

Consumers spent about $87 billion on gift cards last year, according to the Tower Group, a consulting firm, and about $5 billion will never be used. So pay attention to these gift card limitations:

* Although cards can't expire for five years, some retailers won't replace cards that are lost or stolen, or they might charge a fee to do so.
* You're usually out of luck if you're holding a card for a store that goes out of business.
* If you don't use the full amount on the card for your initial purchase, don't forget to spend the remaining amount. People often leave small amounts on cards, contributing to that $5 billion in value that is never spent.
* If you don't use a card for 12 months, companies can start charging a monthly inactivity fee. Although the new rules say they can't charge you more than once a month, there is no limit on the amount of the fee.
* In some cases, the purchase receipt may be required to get a replacement for a lost or stolen card. Some companies require you to register the card online before you can get a replacement.
* The consumer-friendly rules passed in August apply to gift certificates, store gift cards and general-use cards, such as Visa or American Express gift cards. They do not apply to prepaid phone cards, reloadable cards, loyalty or award cards or cards issued for special events or venues, such as a theme park.
* Like ATM machines that charge you to withdraw your own money, some gift cards come with fees for purchasing them. Usually these are ones associated with credit card companies, such as Visa and American Express.
* Because some cards may have been on store racks for a while, their packaging may not spell out the new rules.


3. Tips for Gift Card Recipients

Gift cards, when used properly, are as good as cold, hard cash. Treat them just as carefully.

* Use the cards quickly, before you tuck them away and forget you have them or you lose them.
* Write down the card number and keep it somewhere you will remember. Many cards can be replaced if lost, some for free, others for a fee ranging from $5.95 to $12.
* Don't view the card as a license to overspend. People who receive gift cards often spend much more than the amount on the card.
* Get the receipt from the person who bought you the gift card in case you need it to replace one that is lost or stolen.
* Don't immediately toss the card after the value is used in case the retailer requires the card for returns.


4. Tips for Gift Card Givers

* Not all merchants are as financially sound as others. Make sure you trust the retailer you're buying the card from.
* Read the fine print outlining cards' rules and inform recipients about them. Companies that issue the cards have until the end of January 2011 to include information about fees and other need-to-know conditions pertaining to use on the cards.
* For your best savings, purchase gift cards from the stores where they apply. Otherwise, you may end up paying a fee for the convenience of buying one store's card from a different store.