Now that the holiday season is shifting into high gear, many shoppers are turning to gift cards in an effort to purchase gifts for family, friends, neighbors, and coworkers. These are highly convenient gift choices that offer a high level of versatility for both the giver and the recipient. While an ideal option, it is imperative that all relevant information regarding each gift card is reviewed thoroughly prior to purchase and upon receipt. The merchant or the issuing bank that sells the product may have certain policies put into place that are relevant regarding its usage. In this detailed consumer guide, you will be provided with relevant information pertaining to today’s gift cards.

Types of Gift Cards

Generally speaking, there are two types of gift cards available on the market. The first type is the cash card. The second, a store card. Below, you will find a brief explanation of each:

  1. The Cash Card – This is a type of gift card that may be utilized anywhere. In most instances, they are sponsored by certain companies that are known for their credit card offers. Examples include Visa and Discover. These offer the same flexibility as cash. They may be used to shop, pay bills, and engage in similar activities. While highly appreciated by those that receive them, they are often considered to be an impersonal gift.
  2. The Store Card – This type of gift card is specific to a certain type of retailer. Examples include the Amazon gift card, the Walmart gift card, and the Macy’s gift card. Restaurant cards are included in these types of cards. These are considered to be a more intimate gift option as you are considering the recipient’s interests when providing it; however, there are some drawbacks. First, they each seem to possess certain policies. Second, they may be valid for a certain period of time/have an expiration date. Third, many may actually lose value over time. For example, a gift card to a particular retailer may lose $2.00 in available balance each month. You must carefully read all information when purchasing a store card – just to be certain you understand its terms and may express those terms to the recipient.

Protections Offered by the Federal Law

Despite the policies that may be associated with various types of gift cards, you will be pleased to know that the Federal Law does offer certain protections for the products under the Credit Card Accountability Responsibility and Disclosure Act (CARD).

Under these protections, the card may not expire until a total of five years from the point of activation. There are limitations associated with the fees on the card. Inactivity fees cannot be placed on the card unless no activity has taken place on the card for a period of one year or longer. When there are fees associated with a card, those must be highlighted in the policies of the card.

Furthermore, certain types of additional protections may be offered in certain states.

Gift Card Scams

When purchasing gift cards, you must be alert to the fact that there are some scams surrounding these products. This stems from the fact that the products are hard to trace, and they offer the same advantages as cash. The following outlines some of the most common gift card scams occurring today:

  1. The first scam is that a scammer may steal a credit card and then purchase gift cards on the internet. Once in their possession, they may then resell the gift cards online in order to get the cash from the sale. Once the legitimate credit card owner realizes what has happened, the merchant who sold the original gift cards is then issued a chargeback fee.
  2. The second scam is similar to the first, except that the fraudster steals the bank account information in order to purchase and resell gift cards.
  3. Many scammers have actually hacked data from retailers in order to obtain the numbers of gift cards from retailers.
  4. Many have actually opened gift cards or removed the strips from the cards inside of the store that sells them in order to retrieve the number from them. Then, once they are activated by an unknowing customer in that store, they use the money to make their illegal purchase or conduct an illegal transaction.
  5. Scammers have posed as lawyers and contacted relatives to state that a member of the family is facing legal implications. They then inform the relatives to purchase certain gift cards to pay them for their service or to help the loved one.

If You Become a Victim of Gift Card Fraud

If you find that you are a victim of any type of fraud with a gift card, you should report the scam to the company that issued the product. In some cases, they may be able to provide you with a refund.

Be certain to always keep the receipt associated with the purchase of the card, as well as the number that identifies the card. You should also report the case to the local police department and to the Federal Trade Commission.

The FTC has a compliant assistance where you may report the details of the scam for the purpose and intent of tracking the event.

Gift Card Buying Tips

Now that you are familiar with gift cards, the protections on the products, the scams associated with them, and the steps that should be taken if you become a victim of fraud, it is now time to learn a few tips on buying these products this holiday season:

  1. You should only purchase gift cards from sources that you know and that you trust. You should avoid purchasing from auction websites as they may have been obtained in an illegal manner or may be a counterfeit product.
  2. Do a complete inspection on all gift cards that you purchase. You should make certain that – if in packaging – it has not been open. You should ensure that no protective-based stickers have been removed and that the PIN has not been revealed.
  3. Prior to purchasing a gift card from a certain merchant, be sure to consider the current climate of their finances. For example, if a merchant is considering bankruptcy, you should purchase from another merchant.
  4. Be certain to read all information associated with a card prior to purchase. You should determine what fees are associated with the product, if the card devalues over time, and other relevant information.
  5. When you purchase a gift card and provide it to a recipient, it is essential that you also provide them with a receipt from the purchase. This way, if the card becomes lost or if it is stolen, they will have the information that they require to contact the issuer and report the event to local and federal authorities.

Stay Informed

Gift cards are an ideal gift – especially this holiday season when family gatherings and social events are being cancelled due to COVID-19. They may be easily purchased and mailed to recipients. While many believe them to be impersonal gifts, they just may be the perfect gift for this holiday season.

It is imperative that you stay informed of all relevant information pertaining to these products and that you avoid becoming a victim of a scam. If you have any question about gift cards and/or common financial scams that occur this time of year, feel free to contact us here at Somerville Bank by calling one of our many locations: