Finance Globe

U.S. financial and economic topics from several finance writers.
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Shoping for a Gift Card? The Store Brand May Be a Better Deal

Gift cards are a great option when you don’t know exactly what to buy a person or when you don't have enough time to shop thoroughly. You basically have two options: a store-branded gift card that can only be used for that specific store or chain of stores or a bank/credit card gift card that can be used anywhere that credit card network is accepted.

At first glance, the bank/credit card gift may seem like the better choice since the recipient can use it in more places. However, if there’s a chance your gift card recipient won’t use the card right away, the general purpose gift cards is not the better option.

A survey of 63 gift cards shows that general-purpose gift cards are more likely to charge a maintenance fee after the card has been dormant for awhile. Federal law allows gift card issuers to charge a monthly maintenance or dormancy fee on cards that haven’t been used in more than 12 months. The fee is typically between $2.50 and $3 is subtracted from the card's balance each month until the card expires (a minimum of five years by Federal law) or the balance is depleted.

General-purpose cards also come with a purchase fee ranging from $3 - $7 depending on the card and whether you purchase the card online or in a store. It’s more expensive to purchase a general-purpose gift card online.

Retail store and other limited purpose gift cards less frequently impose a fee on dormant credit cards and there’s generally no purchase fee for these cards, unless it’s purchased online. Shipping fees may apply for cards purchased online.

You can purchase a store-branded gift card for a place like Target, Wal-Mart, or Amazon that allows the recipient to purchase various types of items. Gift cards from these retailers don’t have purchase or dormancy fees.

General-purpose gift cards are better in one area: card replacement if the card is lost or stolen. Each of the eight general-purpose cards surveyed will replace the card or funds on the card in case of a loss. However, only a percentage of store gift cards provide this benefit.

If you purchase a gift card for someone, especially a general-purpose gift card, make sure you get the fee disclosure and pass it along with your gift. With general-purpose gift cards, let the recipient know that not using their credit card for an extended period of time may cause them to lose their gift.

Cash may seem like a less thoughtful gift, but it presents fewer problems than both store-branded and general-purpose gift cards. Cash can be used anywhere. There’s no fee to give cash (unless you pay a fee to pull it from the ATM) and the recipient won’t lose any money if they decide to keep the cash in their wallet for 1, 5, or even 20 years.

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Thursday, 30 March 2023

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