Gift cards can lose value if inactive for a year and state laws allow, but not always.
There are several different types of gift cards and the rules associated with each one may vary. Gift cards from an individual merchant (e.g. Home Depot or Best Buy) typically retain their value until the holder redeems every last cent from the card. Bank-issued gift cards such as Visa® gift cards may start to lose value via monthly service fees after a year of inactivity. Promotional gift cards may lose value or expire completely in an even shorter period of time. To determine if your gift card will lose value, read the terms listed on the card (front and back) or contact the issuing company. (Contact information is typically printed on the back of the card.) For a more detailed explanation, read below.
Laws Against Losing Gift Card Value
Federal and state governments have passed laws to help ensure consumers have the opportunity to use (and retain) the value of their gift cards. In most cases, the state laws are more restrictive than federal. Whichever law provides the most consumer protection, however, is the one that takes precedence.
Store-issued gift cards (both plastic and electronic) and bank-issued gift cards are covered under the Federal Gift Card Law. As such, these types of gift cards may not expire in less than five years, and if the gift card is reloadable, any funds added must also remain valid for five years. Additionally, post-sale fees (anything after the initial activation) can only be charged if the gift card has been inactive (not used) for more than one year. Only one post-sale fee may be charged per calendar month. All applicable fees and expiration dates must be clearly disclosed on the gift card or gift card packaging.
As stated above, if state laws are more stringent, then those laws take precedence over federal. In Montana, for example, fees and expiration dates on retailer gift cards are prohibited, regardless of the terms printed on the card. So, retailer gift cards cannot lose value in this state. The news is not so good in Arizona, however. Laws in The Grand Canyon State impose no restrictions on fees or expiration. Thus, the federal protection is as good as it gets. Service fees, dormancy fees or non-use fees are allowed, provided the terms are clearly stated at the time of purchase and the gift card goes unused for more than a year.
Phone and Promotional Gift Cards Not Covered
Just like the question on whether or not gift cards expire, reloadable prepaid cards that are not intended for gift-giving purposes (e.g. prepaid debit card used instead of a checking account) and promotional gift cards (e.g. free 10 dollar gift card received when a 75 dollar gift card is purchased) are not covered by these laws. These cards can expire and have fees assessed, however the terms must still be clearly disclosed. (More information on promotional gift cards here.)
How do Gift Cards Lose Value?
When fees are legally assessed, gift cards lose their value like water going down a slow drain. Monthly service fees, inactivity fees, dormancy fees and so on may be charged against the card balance until the entire value is depleted. A gift card that starts out with a balance of 50 dollars, for example, may be charged a non-use fee of anywhere from two to five dollars per month. At two dollars per month, the 50 dollar initial balance will be reduced to 26 dollars by the end of the first year. At five dollars per month, the balance will be gone before the first year is up. Getting full value is just one of many reasons to remember to use your gift cards as soon as possible.
What You Really Need to Know
If you’re asking the question, “Do gift cards lose value,” then my guess is you’re wondering if your particular card has been drained. The easiest way to find out the balance of a gift card is to contact the issuing company. The telephone number to call or website to check is often listed on the back of the card. Once you’ve determined the balance, I suggest using it immediately to have access to any remaining funds and to reset the yearly non-use time clock.
If you discover the balance is lower than expected, ask the issuer for a detailed listing of purchases (you may have forgotten using the card) or a description of fees assessed (to be sure they match the terms listed on your card.)
Doesn’t Hurt to Ask
Although an expiration date is printed on Visa gift cards, the value on the card does not actually expire. If you want a new card after seven years (our typical expiration period), you can contact customer service for a replacement. The non-use fees will not be reimbursed, but any balance remaining on the card will still be usable. I am not promising that other companies will do this as well, but it does not hurt to ask.
If you have other gift card questions or need gift card help, add a note in the comments below or reach out to me at @GCGirlfriend on Twitter.
Happy Gift Carding!
~Shelley Hunter, Gift Card Girlfriend