As usual, California just has to be different.
The rash of bankruptcies and other difficulties facing the state have led to changes and reinforcements of laws applying to gift cards in California. Since this is the season when the majority of gift cards are purchased, Gift Card Granny thought it a good time to examine these laws for California's shoppers.
For a state-by-state detailing of gift-card consumer protection laws visit the Consumer Union web site.
1. Gift Cards: California law protects those who give and receive gift-cards from fees related to expiration dates and dormancy, but it's important to understand when such protections apply and when they don't. Consumer protections vary depending on both the type of business from which the card was purchased and on the type of merchandise or service for which the card is used. Both Californian and federal law prohibit the sale of gift cards and certificates in a deceptive manner, so the company or person selling the card can't conceal fees, conditions or restrictions.
2. Mall/multiple-store gift cards: California law allows merchants to impose service fees and expiration dates for cards that can be used at multiple, unaffiliated businesses. As a result, you'll find such fees and restrictions apply to most of these cards.
Any expiration dates must be printed on mall/multiple-store gift cards and fees must be disclosed to consumers. You should weigh the benefits of these cards against the cost. While the card allows the recipient to shop a variety of stores, the value of the gift card may be reduced or eliminated by expiration dates and dormancy fees. As a result, these types of gift cards may not be your best bet.
3. Single-store cards: The traditional single-business gift card for merchandise or services has the best consumer protection. Expiration dates, service fees and dormancy fees are prohibited by law for single-store cards, with limited exceptions.
If the balance is $10 or more, a business doesn't have to redeem a gift card or the balance left after a purchase for cash. The store may redeem it for another card with the remaining value. However, cards with a balance of less than $10 may be redeemed for the remaining value if the consumer asks. This avoids the problem of spending additional money on a purchase when it's difficult to find merchandise priced lower than $10.
Single-store cards can charge a dormancy fee in several instances. These include cards with a value of $5 or less; when the fee is $1 or less per month; if the card has been inactive for 24 consecutive months; or a card can be re-charged by the owner with a value to over $5. Any dormancy fees must be printed on the gift card.
An exception to these rules applies to gift cards for food (excluding restaurant meals). Such gift cards may have expiration dates if that fact is printed in 10-point type on the front of the card. Such large type should make it easier to spot.
Several exceptions apply. For example, expiration dates are not allowed for restaurant gift cards issued after January 1997. Expiration dates may apply for gift cards distributed free as part of a premium or promotion or sold at below face value through a volume discount to employers, non-profits or charitable organizations using them for fundraising purposes. As with food gift cards, however, the expiration date must be printed on the front of the card in 10-point type.
4. Bank gift cards: Because bank gift cards can be used at multiple, unaffiliated businesses, California law regarding expiration dates and service fees doesn't apply. However, California does require expiration dates be printed on the card.
Bank gift cards are both flexible and convenient as they usually tap into a leading credit-card network and can be used at many stores. Lost cards usually are replaceable for a fee. Banks also can charge fees for purchase, monthly activity, inactivity, transaction, balance-inquiry and replacement. That's a lot of fees. Shop around for the best deal, keep your receipts and record the card number, as you would would with a traditional credit card.
Federal banking regulators recently have ordered that national banks provide better disclosure of these fees, including placing expiration dates on the front of cards; disclosing any monthly maintenance or inactivity fees; and providing a phone number or web address for detailed information.
5. Bankruptcies: When Circuit City disappeared last year, the value of gift cards for those stores also disappeared. Card holders either had to file a claim with the bankruptcy court to redeem their credit or say goodbye to their gift-card credit. Unfortunately, card holders are considered unsecured creditors and usually sink far down on the list of creditors. If you hear rumors of bankruptcy, it's best to use your gift card as soon as possible.
For additional information, visit the California Department of Consumer Affairs web site.
Photo by: Clinton Steeds