We reviewed the gift cards of thirty major retailers and food service chains.  The list (contained in the Table below) includes discount stores, department stores, wholesale clubs, toy stores, clothing stores, home improvement stores, video rental stores, grocery stores, sporting goods stores, computer stores, coffee shops, and restaurant chains.  We found considerable variation in stated policies.  We believe the three policies that are most important to consumers are:

1) Whether replacement cards may be obtained if the gift card is lost or stolen and its value has not been used up,

2) Whether the cards have an expiration date, and

3) Whether fees might be assessed to the card’s balance.

Survey results for these policies are presented in the first three columns in the Table below.

We agree with the National Retail Federation that consumers should understand a gift card’s policies before they buy; therefore, we also looked at how well these thirty companies disclose their gift card policies before the card is bought.  Specifically, for those companies whose cards have an expiration date or a potential fee, we looked at whether the cards’ packaging (if any) in stores and the company’s web site (if cards are sold on the web site) disclose the expiration date or potential fee.  The results of those companies’ performance disclosures are shown in the fourth column of the Table.  It should be noted that a company was credited with a “Yes” for disclosure only if the expiration date or fee is disclosed in the stores and on the web site, if cards are sold both places.  At the same time, we were generous in giving credit for disclosure.  Thus, even if the disclosure is multiple clicks away from most of the gift card information on the web site or a consumer has to almost rip the card off the packaging to see the disclosures in stores, we counted that as a disclosure in that sales mode.

Findings

Eighteen (18) of the thirty cards, 60 percent, offer the potential to obtain a replacement card, with the remaining balance, if the original is lost or stolen.  But getting a replacement may require the original receipt and the card number.  Some companies may accept other proof of purchase.

Only three (3) of the thirty cards, 10 percent, have an absolute expiration date.  Two expired after two years; one after three years. (Due to state law, expiration dates don’t apply in California and New Hampshire.)

By contrast, fifteen (15) of the thirty cards, 50 percent, may impose fees if the card isn’t used much.  Most of these are “inactivity” fees of $1 - $2.10 per month that kick in if the card has not been used from 12 – 24 months.  Red Lobster stops imposing this fee once the card is used.  Circuit City and KB Toys have “limited use”  fees that begin if the card’s value has not been spent in 24 months. (Due to state law, these fee schedules don’t apply in California and New Hampshire.)

Eighteen (18) of the thirty cards, 60 percent, impose either an expiration date or a potential fee.  No card imposes both.

Ten (10) of the thirty cards, 33 percent, stand out by offering the potential for a replacement and not imposing an expiration date or fee.  They are:  Best Buy, Borders Books, Costco, Gap, Home Depot, JC Penney, Nordstroms, Old Navy, Sports Authority, and Target.  A caveat should be noted for Best Buy and Home Depot:  they both reserve the right to change the applicable terms and conditions of their cards, so the current ones are not guaranteed for the life of the card.  In addition, only some of the cards sold in Best Buy offer a replacement; many do not.

Of the eighteen (18) cards that impose an expiration date or potential fee, eight  (8), 44 percent, do not disclose those restrictions pre-purchase in both their stores and web sites.  Hecht’s, a May Co. department store, doesn’t even disclose its expiration date on its cards, instead listing a toll free number to call to learn the expiration.  Thus, while the National Retail Federation encourages consumers to understand retailers’  card policies before purchasing, it appears that retailers’ disclosure policies often prevent that from happening.  Even if buyers take the trouble to discover post-purchase that a card has a term or condition they object to, there may be little they can do about it because the cards specify almost uniformly that refunds are not available (though the Gap’s and Starbucks’ web sites say refunds are available for unused cards, the Gap’s by check).

Recommendations

For Card Buyers/Givers

Choose one of the ten standout cards highlighted in this study, bearing in mind our caveats on Best Buy and Home Depot.  While the features highlighted in this study may not be critical to all recipients, we believe they will appreciate receiving a card with all the features we have highlighted.  In addition, our experience is that expiration dates, fees, or losing a card becomes a factor much more often than one would expect.

Send the original receipt along with the card to the recipient or the recipient’s parent.  Tell them to keep it in a safe place so they can seek a replacement if the card is lost or stolen.

When buying a gift card, look carefully at the pre-purchase disclosures of terms and conditions on the web site and the packaging in the store.  If terms are not given or appear too cryptic to be complete don’t buy.

For Recipients

Look at the terms and conditions on the back of a gift card as soon as you receive one.

Set up a family gift card file in which the original receipts and card numbers are retained.  This will help make a claim if the card is lost or stolen.

Even if the card says replacements are not provided, contact the company if it is lost or stolen.  It doesn’t hurt to ask, and we suspect more companies will adopt replacement policies.