Low Interest Credit Cards

Giving gift cards for the holidays is a popular option for many Americans, but the downturn in the economy has had a negative effect on the gift card industry.  According to a new survey conducted by the National Research Network and the Hartman Group: “1/3 of consumers who buy or receive gift cards plan to buy few gift cards or spend less on gift cards this November and December holiday season due to the current economic situation.”  Consumers are looking to spend wiser this season.  There are fees and expiration dates associated with using gift cards that have recently come under federal scrutiny in the Credit Card Act of 2009.  While most of the provisions of the Credit Card Act take effect in February 2010, the gift card portion does not take effect until August 2010.  So in the meantime there are things the consumer needs to know to avoid fees and get the most out of their gift cards.

General Purpose Cards
There are two categories of gift cards used today.  The first is the general purchase card.  These are bank issued cards with the Visa, Master Card or American Express logo stamped on them. Consumers spend $4 billion per year on general purchase cards.   These are not traditional credit cards as they require no credit check, or bank account to purchase.  They are attractive as gifts because they are not limited to a particular store and can be used anywhere credit cards are accepted.   These types of cards are loaded with fees, for example Visa charges $3.95 to purchase a $25 card, making the total cost of the card actually $28.95.  Some banks charge monthly fees on cards that can run from $4-$7. In response to consumer complaints, on September 30, 2009 American Express announced it had eliminated monthly fees on all of its gift cards including those that had already been purchased.  Initial purchasing fees still apply.  Many general purpose cards expire 6 to 12 months after activation. The new rules in the Credit Card Act of 2009 expand the expiration date to 5 years after activation.

Other regulations include:
• Inactivity fees can no longer be imposed unless there has been no activity in a 12 month period.
• Inactivity fees must be clearly revealed on consumer statement. 

Store Gift Cards 
The second type of gift card is a store gift card.  These cards are store specific and are not affected by the Credit Card Act of 2009.     According to the Consumer Federation of America most of the $50 billion spent on gift cards are spent on store gift cards such as Target, Lowes and ITunes.  These cards do not have fees, and have no expiration date.   A recent one day sale by retail giant Wal-Mart gave away $100 store gift card with every new $199 Xbox 360 Arcade bundle purchased.  Other stores are sure to follow this gift card give away to lure customers in for the holiday shopping season.

Consumer Education 
To help clear confusion, the Consumer Federation Association and the National Association of Consumer Agency Administrators recently began to distribute a brochure to help consumers understand the pitfalls of gift cards.  

Their recommendations include:
• Watch the expiration dates and the initial purchase price.
• Check monthly fees and charges that may be assessed after having the card 6-12 months.
• Use all card value within 6 months.  This recommendation is made due to the rash of store bankruptcies.  The stores are not obligated to honor the gift cards in case of bankruptcy.

Buyer Beware
Gift cards are a convenient way to buy for the person who has everything or when you just don’t have time to go shopping.  Make sure that you read the fine print to avoid being taken in by high fees and quick expiration dates.

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