DebtFreeGuru.com's - Tip of the Week - Monday, December 1, 2003

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The Lowdown on Holiday Gift Cards
(As seen on CompuServe.Com)

From snowflakes, Christmas stockings and menorahs to Harry Potter and Harry Connick Jr., gift cards are getting all dressed up for the holidays.

 

Before you give that hard-to-shop-for someone a gift card, be sure to take a close look at the fees that come with it.

 

There's nothing remotely festive about monthly maintenance charges and other fees your gift card recipient may be tagged with. And the hefty shipping, handling and service fees charged to the gift-card giver can take a big chunk out of any holiday budget.

 

To learn of some of the more inventive gift-card offers this holiday season and their often-overlooked downsides, check out this roundup from Bankrate.com.

 

Remember, as cute and appealing as these cards may be on the surface, it's the boring, old fine print underneath that really takes aim at your wallet. Don't let this happen to you.

 

Here are 10 important questions every gift card giver and recipient should ask:

 

Where can I use my gift card?
The answer depends on the type of gift card that you buy. There are two kinds of gift cards -- store-specific gift cards and general-purpose gift cards.

 

You can use a store-specific gift card to buy merchandise from a particular store or through a store's Web site. Not all gift cards can be used for online shopping, so be sure to ask.

 

A general-purpose gift card from Visa, MasterCard or American Express may be used almost anywhere those cards are accepted. Important exceptions, including airline tickets, may apply. Be sure to check with your gift-card program for details.

 

The key advantage of general-purpose gift cards is the flexibility you have in using the cards. The downside? Fees, fees and more fees. Many general-purpose gift cards come loaded with fees. It's important to shop carefully.

 

If you know a person's tastes, a store-specific gift card may be the way to go. Store gift cards are less likely to charge hefty fees.

 

When does the gift card expire?
Is your gift card good for six months? A year? Even longer? Be sure to check.

 

With some gift cards, once you pass the card's expiration date, you're done. It doesn't matter how much value is still on the card, you won't be able to use it.

 

Other gift-card programs will send you a replacement card with your remaining balance on it. But boy, do you pay for this privilege. Fees on replacement cards range from $5.95 to $10. Your best bet is to use your gift card before it expires.

 

Are there shipping and handling fees?
Ordering a gift card online sure is convenient, but you could be zapped with a fee for shipping and handling. A prepaid Visa gift card from National City charges a $4.95 to $8.95 fee for shipping and handling. Want that gift card delivered on the double? Express delivery will cost you $15. Order the Target Gift Card online, and you'll pay $1.95 shipping charge for standard delivery. You can minimize or avoid these kinds of fees by shopping early and purchasing gift cards directly from retailers.

 

Is there a service fee?
Gift cards purchased by phone or online often charge service fees. Service fees range from $3.95 all the way up to $11.95. American Express charges its gift-card customers a $3.95 service fee for online orders and a $7.95 fee for phone orders. Buy a gift card from Fleet Bank, and you'll be charged a service fee ranging from $3.95 to $9.95, plus an additional $4 fee if you order your gift card by phone.

 

You may be able to save yourself a few dollars per gift card by ordering your cards online rather than over the phone. Be sure to check.

 

Is there a monthly maintenance fee?
Some gift cards will charge you a monthly maintenance fee if you still have a balance on your card after six months or a year. With the American Express Gift Card, a $2 monthly fee kicks in after a year. With the Fleet Visa Gift Card, a $2.50 monthly fee kicks in after just six months.

 

Anyone receiving a gift card this holiday season should immediately check for monthly maintenance fees. A $25 gift card could get whittled down to nothing before you know it. If your gift card comes with a monthly maintenance fee, you'll want to use it promptly. Whoever gave you the gift card meant that money for you, not the bank or retailer.

 

How do I check my gift-card balance?
Many general-purpose gift cards allow you to check your balance online and by calling a toll-free number. With store-specific gift cards, you may be able to check your balance online, in stores or by calling a toll-free number.

 

It's also a good idea to keep track of your balance on your own. Stash receipts for purchases made with your gift card in a safe place. That way you'll know precisely how much value is left on the card. Those receipts will also come in handy if your card is lost or stolen. With some gift-card programs, you have to supply your most recent receipt before a replacement card will be sent to you.

 

What happens if my gift card is lost or stolen?
With some retail gift cards, if you lose the cards you're just plain out of luck. For example, neither Barnes and Noble nor Blockbuster Video will replace a gift card if it is lost or stolen.

 

Other retailers are much more lenient when it comes to lost or stolen cards. Both Bloomingdale's and Macy's will issue you a new card as long as you have proof of your most recent purchase.

 

Some general-purpose gift cards will send you a replacement card as well, but you may have to pay a hefty fee. Replacement card fees range from $5.95 to $10.

 

Be sure to find out what recourse you have, if any, if your gift card is lost or stolen, and guard your card accordingly. It's best to treat a $50 gift card as you would treat $50 in cash. And don't forget to hang on to your receipts. You may need them to get a replacement card.

 

Can I exchange my gift card for cash?
Thinking of cashing out a holiday gift card? Think again.

 

Many gift cards aren't redeemable for cash. Plus, the general-purpose gift cards that will send you a check for your remaining balance are probably going to zap you with a substantial fee. Check processing fees can be as high as $10 or $15.

 

You'll get a lot more value out of your card by shopping with it rather than trying to cash it in.

 

Can I use my gift card to withdraw cash at an ATM?
Some general-purpose gift cards come with PIN numbers, so you may be able to use them to get cash from ATMs.

 

The downside is, once again, fees. The Bank of America Visa Gift Card charges you a $1.50 service fee each time you withdraw cash from the card at an ATM. The CharterOne MasterCard Gift Card charges you $2 for each ATM withdrawal.

 

Can I make a purchase for an amount greater than my gift card?
Yes, you can but you'll need to be careful. First off, be sure to tell the merchant in advance that your gift card will only cover a portion of your purchase. If you don't, your gift card will be declined.

 

Be aware that some stores, including department stores, will only accept two forms of payment for a single purchase if the second form of payment is cash or a personal check.

 

So if you plan on using your gift card to pay part of a store bill, it's a good idea to bring cash or your checkbook along with you.

 

Want to apply the few remaining dollars of a gift card to an online purchase? It's going to be tough. Most Internet merchants do not accept two forms of payment for a single purchase. So unless you can find an online purchase for the exact amount remaining on your gift purchase, you're probably out of luck.

 

Gift Cards Get Decked Out for the Holidays
(As seen on CompuServe.Com)

Prepaid gift cards are pouring on the star power and getting all dressed up for the holidays. That's because many people are finding them to be the perfect gift.

 

After all, you don't have to worry about size or color.

 

But there are disadvantages to the cards, too.

 

Here's a roundup of the cards and their often-overlooked downsides:

 

The card: Bloomingdale's Gift Card
The look: Harry Connick Jr. holding an armful of holiday gifts
The downside: Cannot be redeemed for cash

 

The card: Hilary Duff Prepaid Visa
The look: The teen star, wearing lots of pink, floating on a raft in a swimming pool
The downside: A $2 monthly account maintenance fee kicks in after six months

 

The card: Bank of America Visa Gift Card
The look: Christmas and Hanukkah designs
The downside: Service fees ranging from $5.95 to $11.95

 

The card: National City Prepaid Visa Gift Card
The look: Snowflakes
The downside: $4.95 to $8.95 shipping and handling fee, plus a $2.50 fee if you don't use a National City debit or credit card to purchase the gift card

 

The card: CharterOne MasterCard Gift Card
The look: Special card designs for Christmas, Hanukkah and Kwanzaa
The downside: You pay a $2 fee for each ATM withdrawal you make with the card

 

The card: Target Gift Card
The look: A puppy in a stocking, red snowflake in a swirl, colored bows and holidays from around the world
The downside: $1.95 shipping charge for cards ordered online

 

The card: Borders Gift Card
The look: Harry Potter, SpongeBob Squarepants, or more traditional design of a gift box with stripes
The downside: Not returnable or redeemable for cash

 

The card: Barnes and Noble Gift Card

The look: The Cat in the Hat
The downside: Will not be replaced if lost or stolen

 

The card: Blockbuster Gift Card
The look: Finding Nemo, SpongeBob Squarepants, Hello Kitty, Lord of the Rings
The downside: Will not be replaced if lost or stolen
 

DebtFreeGuru.com - Tip of the Week - Monday, December 1, 2003

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