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Getting the most from gift cards

December 26, 2011

By Doresa Banning | Money Rates Columnist

The estimated total of unused gift cards in the world is $30 billion, according to Plastic Jungle, an online gift card exchange.

Let that figure sink in for a minute.

Naturally, these ubiquitous gifts are often set aside for later use. But how often have you forgotten about them entirely? Or found when you've gone to redeem them that it's too late -- they've expired or lost their value due to monthly fees?

To give consumers more time to redeem gift cards and limit penalties, Congress changed the rules governing them via passage of the CARD Act. But while helpful, the new rules don't eliminate gift card expiration dates and fees. Therefore, your goal should be to use all of the gift cards you receive before their value starts shrinking.

It can help to think of gift cards as cash in your checking account. You wouldn't knowingly toss cash from your checking account, but letting a gift card go unused essentially amounts to the same thing.

The key points

To be a savvy user, you should note four things about any gift cards you receive:

1. Type

Gift cards are usually one of three types: open loop, closed loop and hybrid semi-closed loop. Closed-loop cards, typically issued by a store or restaurant, are redeemable only at one of the issuing business' locations. Hybrid semi-closed-loop cards may be accepted by a broader range of merchants, such as a shopping mall. Open-loop cards, typically from credit card companies and banks, can be used at nearly any establishment that accepts credit cards. Knowing what type of card you have can help determine where you should redeem it, and your options may sometimes be greater than you think.

Closed-loop gift cards remain the most commonly purchased, but hybrid cards are growing in popularity, according to a 2011 study from First Data Corp., a Georgia-based payment processing firm.

With some gift cards, including certain ones from Walmart, Visa and MasterCard, you even may be able to reload them with new funds once you've spent the initial amount.

2. Expiration date

In the past, a gift card could expire within a month after it was bought. Today, gift cards can expire, but the period they're good for has been extended by law for five years, either from the purchase date or from the last reload date.

3. Fees

Gift cards may have certain fees associated with them, including an initial issuance fee or a cash-out fee, which reduce the amount on the card.

The rules concerning inactivity fees have changed. They're still allowable, but only when a card hasn't been used in a year. And even then, you can only be charged one fee per month.

4. Disclosure info

By law, details concerning gift cards can no longer be hidden (there goes that excuse for not redeeming them.) Under the new rules, the expiration date and fees that apply to a card, if any, must be stated conspicuously on it. A website and, if available, a toll-free number also must be given as a resource for further information. When you receive a gift card, take note of this information, and possibly even write it on your calendar.

But what if you really don't want it?

After you've noted all of these things about a gift card, you may still find you have little use for it. But that doesn't mean it doesn't have value. If you feel you can't use the card for its original purpose, you can still consider:

  • Selling it. Various online portals exist through which you can sell your gift cards -- plasticjungle.com, cardpool.com and ibuygiftcards.com are some examples. You won't get its full value, but you may get much of it in some form -- cash, a PayPal payment or something else -- depending on the card and the exchange you choose. To learn more, visit some websites and investigate your options.
  • Donating it to charity. Most, if not all, nonprofit organizations would love to receive your unused gift cards. And you'll feel much better about donating them (and getting the associated tax deduction) rather than letting them go to waste.
  • Paying bills with it. OK, this one doesn't exist quite yet, but you may soon be able to make payments on your car, utility or mortgage bill with an unredeemed gift card via ChargeSmart, an online, third-party payment provider that has partnered with Plastic Jungle. While the ETA for this service is still undetermined, don't be surprised if new ways to recycle gift cards such as this emerge in the near future.

When you receive a gift card, try to remember that someone spent money on it with the goal of bringing you happiness. By doing all you can to get the most from it, you'll ensure that their investment wasn't wasted.

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