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Background
Gift cards are an increasingly popular gift. And why not? They have many advantages for both the gift giver and recipient. The giver needs only to pick the store and the amount, not the gift. The recipient can pick a gift that he or she really wants. Both avoid the hassles of returns and the credit card size make them easy to ship and to carry in a wallet. Technology advances automatically deduct expenditures from the cards and allow them to be “reloaded” with more value. Balances can be checked by phone or online, and it may even be possible to get a new card issued, with the current balance, if the old one is lost or stolen. So, it is no surprise that the National Retail Federation’s (NRF) 2003 Gift Card Survey found that nearly 70 percent of consumers plan to buy gift cards this holiday season. They plan to spend about $17.24 billion on these gift cards accounting for nearly 8 percent of all holiday sales (which NRF forecasts will increase 5.7 percent this year to $217.4 billion, the largest increase since 1999). As gift cards have become more popular, increasing attention is being called to retailers’ varying policies regarding the cards. Press reports have highlighted that some gift cards have expiration dates or “inactivity” fees, such as $2.00 per month after a card hasn’t been used for 18 months. Methodology
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.
[1] “Gift Cards Emerge as Perfect Choice for Person with Everything,” National Retail Federation Press Release, November 20, 2003.
[2] Bain & Company estimate cited in “Bah humbug: Gift Cards that Stop Giving,” Consumer Reports, December 2003, p.6.
[3] ibid.
[4] “Gift Cards Emerge as Perfect Choice,” National Retail Federation Press Release, November 20, 2003.
TABLE
Are Replacement Cards available if lost
or stolen?
Is there an Expiration date?
Are there Fees?
Is the Expiration date/fee disclosed pre-
purchase in both store and web site?
Barnes & Noble
No
No
$1.50/mo after 12 mo. Non-use
No
Best Buy
[5]
Some, with proof of purchase
No
No
N/A
Blockbuster
No
No
$2/mo. after 24 mos. Non-use
No
Bloomingdale’s
[6]
With proof of purchase
2
yrs
No
No
Borders Books
With proof of purchase
No
No
N/A
Brinker Intl. Restaurants
[7]
No
No
$2.00/mo after 12 mos. Non-use
Yes
Circuit City
With original receipt
No
$2/mo. after 2 yrs.
Yes
CompUSA
With proof of purchase
No
$2/mo. after 12 mos. non-use
No
Costco
With original receipt
No
No
N/A
Gap
With original receipt
No
No
N/A
Giant Food
No
No
$2/mo. after 18 mos. non-use
Yes
Hecht’s
[8]
With proof of purchase
3
years
No
No
Hollywood Video
No
No
$1/mo. after 12 mos. non-use
Yes
Home Depot
[9]
With proof of purchase
No
No
N/A
JC Penney
With proof of purchase
No
No
N/A
KB Toys
No
No
$1.50/mo after 24 mos.
No
KMart
No
No
$2.10/mo after 24 mos. non-use
No
Kohl’s
With original receipt
No
$1.50/mo after 24 mos. non-use
No
Lowe’s
No
No
No
N/A
Nordstrom’s
[10]
With proof of purchase
No
No
N/A
Old Navy
With proof of purchase
No
No
N/A
Red Lobster
[11]
No
No
$1.50/mo after 15 mos. non-use, until used
No
Safeway
No
No
No
N/A
Sam’s Club
With original receipt
No
$1/mo. after 24 mos. non-use
Yes
Sears
With proof of purchase
2
years
No
Yes
Sports Authority
With proof of purchase and ID
No
No
N/A
Starbucks
No
No
$2/mo. after 12 mos. non-use
Yes
Target
With original proof of purchase
No
No
N/A
Toys “R” Us
No
No
$2/mo. after 24 mos. non-use
N/A
WalMart
With original receipt
No
$1/mo after 24 mos. non-use
Yes
[5] Company reserves right to alter terms and conditions of its cards.
[6] A Federated Department Stores chain, along with Macy’s, Burdines, Lazarus-Macy’s, and more.
[7] Chili’s, Macaroni Grill, On the Border, Corner Bakery, Big Bowl, Cazymel’s, and Maggiano’s
[8] A May Co. Department Stores chain, along with Lord & Taylor, Filene’s, Kaufmann’s, Strawbridge’s. and more.
[9] Company reserves right to alter terms and conditions of its cards.
[10] Some Nordstrom’s cards sold at other retailers do not offer replacements.
[11] A Darden Restaurants chain, along with Olive Garden, Bahama Breeze, and Smokey Bones BBQ.
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