Forgotten gift cards are as much a part of the holidays as regifted fruitcakes and awkward family photos. But even if you've forgotten about a gift card balance, that doesn't mean retailers and state governments have.
Unused gift card balances are something of an annoyance for retailers; they're a liability that can stay on a company's books for years. To get them off their books and ensure they get to keep the cash even if you forget to spend it, many have created fees and expiration dates to try to absorb balances back into their bottom lines as quickly as possible. Until the Credit Card Accountability, Responsibility and Disclosures Act, or CARD Act, goes fully into effect, how quickly they can do so depends on a patchwork of state laws.
"The laws vary a lot," says Karen Anderson, a senior compliance adviser with Abandoned Property Services LLC, in New York.
But retailers aren't the only folks gunning for your unused gift card dollars; cash-strapped state governments also have their eyes on them. In many states, officials can force a gift-card issuer to turn the unused balance over to their state -- a process called escheat.
So how can you protect your gift card balances from getting caught up in this clash of the titans?
Most states mandate a period immediately following purchase when the value of a card is legally protected. This period lasts at least a year and a few states, like Virginia and Nebraska, have no such limits as long as retailers disclose their terms clearly.
Although uncashed gift cards appear to be free money for a retailer, most businesses prefer you spend your gift card as soon as possible after you get the card, says Jennifer Borden, a partner at Holland & Knight based in Boston.
"The retailers don't want the gift certificates to go outstanding," says Borden. "They want customers in their stores shopping and potentially buying more than just the value of the gift card."
Eaten by fees
Unfortunately, despite the best wishes of retailers, some consumers never get around to using their cards during this legally protected period. As a result, many unused cards end up having their value eaten away by fees or eliminated altogether by expiration dates before becoming legally dormant and vulnerable to being escheated by the state.State laws now govern how quickly a retailer can begin levying fees; when the CARD Act takes effect Aug. 22, 2010, retailers will have to wait at least a year before doing so.