CONSUMER ALERT

MIKE COX
ATTORNEY GENERAL

The Attorney General provides Consumer Alerts to inform the public of unfair, misleading, or deceptive business practices, and to provide information and guidance on other issues of concern.

GIFT CARDS & GIFT CERTIFICATES

READ THE FINE PRINT

The National Retail Federation estimates that consumers spent $27.8 billion on gift cards during the 2006 holiday shopping season, up from nearly $18 billion in 2005.  Despite the ease and popularity of gift cards, there are drawbacks to consider before purchasing or using gift cards.

THE DIFFERENCE BETWEEN GIFT CARDS AND GIFT CERTIFICATES

Gift Cards

Gift cards, sometimes referred to as "smart cards," represent a stored value of money.  The card has information stored in a magnetic strip or a microprocessor chip.  It is similar to a debit card, except gift cards are not tied to a consumer's bank account.  The two broad categories of gift cards are merchant-issued gift cards or bank-issued gift cards.

A consumer who purchases a merchant-issued gift card indicates how much they want to spend, and in return, the merchant should disclose any applicable fees, charges, expiration dates, and other restrictions.  The gift recipient may then use the gift card toward purchases at that merchant or other participating merchants.  Some merchants place restrictions on use of the card -- for instance, the card may only be used for online or in-store purchases.  Some gift cards have pins on the back of the card that should only be revealed by the purchaser or recipient at the time they would like to use the gift card to make a purchase.

A gift card issued by a bank or other financial institution contains an identity symbol for a card network such as American Express, VISA, or MasterCard.  Usually these bank-issued cards can be used at any location accepting credit or debit cards from that network (ie. locations accepting VISA, American Express, and/or MasterCard).  The banks that issue these cards are required to provide consumers who purchase and receive their cards with disclosures related to fees, charges, expiration dates, and other restrictions.  The Office of the Comptroller of the Currency (OCC), which is responsible for regulating national banks, has gift card disclosure guidelines that national banks must follow.  The guidelines publication is available at http://www.occ.treas.gov/ftp/bulletin/2006-34.doc

Gift Certificates

A gift certificate represents the right of the person named on or holding it to present the certificate to the referenced merchant for goods or services.  The main difference between a gift card and a gift certificate is a gift certificate does not come with the "smart card" technology but, instead, is recorded on paper and sometimes resembles a check. 

GIFT CARD / CERTIFICATE BUYING GUIDELINES

As with any purchase, be sure to read the fine print before buying.  Pay particular attention to the following considerations:

1.     Purchase or use restrictions.  Some retailers may only allow you to use the gift card at specific store locations.  Others may allow you to use the card at different retailers or online.  Some retailers have limited-use cards -- for example, cards that can only be used to buy gas at a gas station.  It is important to become familiar with these restrictions before you buy a gift card.  

2.     Expiration date.  Like location restrictions, expiration dates on gift cards can create an unwanted hassle.  Find out if a merchant or gift card issuer places expiration dates on their gift cards before you purchase.  If there is an expiration date, reconsider whether purchasing a gift card from this particular merchant is worth any future problems that may arise.  Even if there is no expiration date, encourage recipients to use the gift within three months of receipt.  After a few months, it is increasingly likely the certificate or card will be lost or forgotten!

3.     All fees.  Be sure to ask about any maintenance, balance inquiry, use, dormancy, or reactivation fees.  Gift card issuers should clearly disclose any fees, but wise purchasers ask whether there are any fees that have not already been disclosed.  Like expiration dates on gift cards, if a retailer or issuer charges fees on gift cards, you may want to reconsider whether purchasing a gift card from them is worth potential future hassle.  This is especially true if any fees were not clearly disclosed to you up front, and you learned about the fees only after asking.

4.     Replacement policy for lost or stolen cards.  This is important information to know in the unfortunate event the card is lost or stolen. 

5.     Purchase from only reputable sources and inspect the card before you buy.  Although purchasing gift cards from online auction sites may be easy and inexpensive, you may be purchasing stolen or counterfeit gift cards.  Consider purchasing gift cards directly from the merchant or issuer, either online or at their brick-and-mortar locations.  Inspecting the card before you buy allows you to make sure protective stickers have not been removed, codes or PIN numbers remain hidden, and the card has not otherwise been altered.  If you purchase a card that you later discover has been altered, report it in writing to the issuer immediately.

6.     Ask for an extra receipt.  Keep the duplicate receipt and give the original to the gift recipient.  A receipt will be critical if the card is lost or stolen and important in case an error occurs and a merchant indicates that there is less value on the card than you anticipated (for example, if you use a gift card that should have $50 on it, but the merchant informs you that the card is empty).    

FILE A COMPLAINT

If you are confronted with a business that refuses to honor an expired gift certificate or card, please file a complaint with the Attorney General's Consumer Protection Division at:

Consumer Protection Division
P.O. Box 30213
Lansing, MI 48909

517-373-1140
Fax: 517-241-3771

Toll free: 877-765-8388

www.michigan.gov/ag (online complaint form)