2006 Gift Card Study
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"What's happened in terms of closed-loop retailer
gift cards is that retailers want to be consumer-friendly,"
says Horne. "All but a few have backed away because benefits
accrue to them whether there are fees, expiration dates or not."
The Bankrate.com study bears this out. Last
year, Sears had a five-year expiration date on its plastic gift
card and Costco had a two-year date on its electronic gift cards;
neither has an expiration date now. Macy's and Bloomingdale's have
two-year expiration dates, except in those states where such terms
are not allowed. All of the other retailers have eliminated expiration
Still, some retailers haven't given up their dormancy
fees. These are fees that are charged monthly after six or 12 months,
depending on the terms of the gift card. CVS charges $2 per month
service fees after 12 months. The stores owned by Delhaize America
-- Food Lion, Hannaford, Kash n' Karry and Sweetbay -- charge $2.10
per month in service fees if a card has been inactive for 24 months.
The open-loop cards, which can be used at a variety of retail places, continue to impose fees, though, since that is how they make their money.
Discover Card charges $3.95 for a regular gift card
(that includes shipping) and $6.95 for its premium gift card package;
last year Discover Card gift cards were shipped free. MasterCard
charges $5.95 per card, compared with zero to $6 last year. Visa
gift cards cost $2 to $10.95, depending on where the card is purchased
(shipping is additional). American Express charges $3.95 to $7.95
per card plus delivery.
American Express gift cards are the only open-loop
cards that do not have an expiration date. American Express does
have dormancy fees, however. After 366 days from the issue date,
it charges a $2 monthly service fee. MasterCard gift cards expire
after six months, and Visa's expire after two or three years, depending
on where it is purchased.. MasterCard charges a $10 inactivity fee
after the expiration date and $3 per month thereafter -- down from
the $5 per month fee last year, but still a fee. Discover Card gift
cards expire in 24 months and charge a $2.50 monthly fee if the
card isn't used for 12 consecutive months.
Yet, this doesn't discourage some consumers, says Horne. "I
think people are continuing to buy the open-loop cards regardless
of fees. They serve a niche. They give consumers a lot of choice
-- or let the recipient make the choice. They're especially good
for gifts for people you don't know very well."
Disclosing the fees
Understanding what fees are charged has often been difficult, too. "What we found in our recent research is that on those cards that don't charge a fee, disclosure is clear and easy to understand," says Horne. "Others are intentionally obfuscating. Best Buy card says no expiration, no fees -- very simple and very clear. If you go to somebody who's going to try to get a fee, it's in a smaller point type. It's dirty pool."