Steven Ciantro is a certified credit counselor, a management representative of American Debt Enders, and a former finalist in Inc. magazine and Ernst and Young’s Entrepreneur of the Year contest. He is also a Talk-Show Radio Host and successful published songwriter and musician (his album January Tyme can be heard on YouTube), the inventor of a patented medical device, a public speaker on debt issues, and the official debt expert for motivational speaker Gail Kasper’s Top 1% Club.
Chances are you probably received a gift card or two over the holidays. Remember the Credit Card Reform Act of 2009, which was supposed to protect consumers from usurious interest rates? Well, unfortunately it only went halfway. But, included in that bill were some consumer protections that applied to gift cards and made it more difficult for merchants to take away the actual value of the gift card if you waited too long to use it.
Prior to passage of the Reform Act, these were some of the negatives of gift cards:
Gift cards could expire within five years of their activation.
It was not unusual to be charged an activation fee of between $2.95 and $6.95 for what were called general purpose gift cards. The fee was paid for at the point of purchase by the buyer or giver of the card. If you purchased the card online, you could be charged a shipping charge of $2.95 to $6.95.
One way, even now, to avoid fees is to avoid purchasing general purpose gift cards—for example, Visa general purpose gift cards—and instead purchase a card that is specific to the item, such as a restaurant card.
Be aware that there is a difference between a prepaid debit card and a prepaid general gift card. Many prepaid general gift cards come with more fees than actual gift cards (cards for a specific store or restaurant).
Another very important point regarding gift cards is that, although every financial writer in the country has written about the passage of the 2009 Reform Act, not quite as many writers have covered state laws passed since the inception of the act. This is a very important point, since these state laws very often fill in the missing protections that were not covered in the federal law.
Here is a partial list of state protections for consumers purchasing gift cards.
(Go here for the entire list: http://www.ncsl.org/issues-research/banking/gift-cards-and-certificates-statutes-and-legis.aspx)
California: No expiration dates and no fees, with one exception. Permits a $1 per month fee only when the card has a balance of $5 or less, the card has been unused for 24 months, and the card is reloadable. Covers gift cards usable at a single store or chain. Multiple-use gift cards are not covered.
Connecticut: No expiration dates. No inactivity fees.
Hawaii: No expiration within the first two years. No fees. Effective July 1, 2005.
Illinois: Before Jan. 1, 2005, cards which do not have an expiration fee do not escheat to the state. Starting Jan. 1, 2005, cards must also have no service fees in order to avoid escheat.
Iowa: No fees unless there is a written contract between the card issuer and the holder of the gift card.
Louisiana: No expiration dates shorter than five years. No service fees, except for a one-time handling fee of $1. Covers cards issued to be redeemed in goods or services provided by the card seller.
Maine: No expiration dates. No fees unless printed on the card, allowed by written contract with the card owner, and not unconscionable.
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ABOUT STEVEN CIANTRO: Steven is well suited to advising on debt issues. Growing up from humble beginnings, he personally made a fortune from nothing in his earlier years and lost it. The experience completely altered his value system. It seemed every professional debt expert Steven and his wife spoke to wanted to put them into even more debt to help them. It took years for them to untangle the financial mess, which they ultimately did on their own, gaining a tremendous education in the process. However, the experience left Steven with chronic kidney disease, which he still battles today. In 2004, Steven found work at a national nonprofit credit counseling company. After six months, he became regional manager; Steven had found a new calling. He is in the unique position of not only being a true expert on debt relief issues, but also understanding firsthand how oppressive debt can be. In 2006, American Debt Enders was started as a company that would offer free credit counseling; it was among the first companies in the nation to use the business model of offering multiple debt relief programs and solutions under the same roof.
This article is courtesy of the Top 1% Club and the Top 1% Club Mentor Gail Kasper. For additional information on Gail Kasper, her television appearances and speaking engagements, please visit gailkasper.com.