Avoid Hidden Fees on Holiday Gift Cards

New laws regarding gift cards are eliminating some of the hidden pitfalls that have plagued gift-givers and recipients for years.

Roughly $88 million in gift cards are purchased each year. But of those purchased, about $5 million worth go unused. In the past, many cards featured expiration dates or fees were accrued if the cards weren't used in a timely manner, a loophole many customers were unaware of.

Gift cards are a popular gift, enabling shoppers to give recipients the choice of their own gifts. However, the "use or lose" mentality of the gift cards has long been a major downfall of gift cards. But rules aimed at helping consumers can make gift cards even more popular in the future.

The rules are a result of the Credit CARD Act (Credit Card Accountability Responsibility and Disclosure Act of 2009). New regulations state that full disclosure of fees and expiration dates must be available on the cards.

As of August 2010, gift cards purchased on August 22 or after must hold their value for five years. Each time the value on the card is reloaded, the five-year time span starts anew on the amount added. While the actual cards can have expiration dates, the values of the cards are still valid. That means if a card expires with money still remaining, a person can call the issuing card company and have the value transferred to a new card for free or return the remaining balance to the consumer.

Some cards still aren't covered under the new law. These include rebate and loyalty cards as well as prepaid debit cards. What's more, some one-time transaction fees, such as those issued by the bigger name credit card company gift cards, may still be legal.

Individuals who use gift cards in a timely manner could see little difference in the advantages provided by the new card rules. Still, many consumers have peace of mind this holiday season if they choose to purchase gift cards for friends and family.