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Federal Reserve Wants Your Opinion About Gift Card Fees

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The Credit CARD Act of 2009 instructed the Federal Reserve to enact new regulations for gift cards. I have a love/hate relationship with gift cards; they’re convenient gifts to give when you know the recipient is a fan of a certain store. Unfortunately, the past few years have seen restrictions added to gift cards which make them unappealing. Some gift cards expire if not used within a certain amount of time, rendering the money spent to buy the card worthless. Some gift cards come with a monthly fee or an inactivity fee.

It makes more sense to simply give cash rather than a gift card, eliminating the third-parties like stores and payment processors and eliminating any limitations to its use. This avoids the issue of whether fees should be charged for these products. But some people consider the gift of cash inappropriate, more than those who consider the gift of gift cards inappropriate. Thus, the Congress and now the Federal Reserve wants to protect those who choose to buy and those who receive gift cards.

The new regulations call for an elimination of inactivity fees (until the card has been inactive for a year) and eliminations of fees for balance inquiries and transactions. All of the changes to gift cards by law do not need to be made effective until August 22, 2010.

The Federal Reserve is preparing to accept comments from the public for thirty days. You can read the full proposed regulation and in the next few days, you can begin to submit your comments to the Fed here. (Look for Regulation E, R-1377.) Here are some questions to consider as you formulate your comments:

  • Are these restrictions necessary when consumers can easily choose not to purchase gift cards?
  • Would better disclosure be better than restricting fees?
  • There is a cost to offering gift cards; how should stores pay for those expenses if not with fees?
  • Should all gift card fees be eliminated, so gift cards are as good as cash in all cases?
  • Why wait until August 22? Can the new regulations be implemented sooner?

Photo credit: _rockinfree

Updated February 10, 2011 and originally published November 17, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 1 comment… read it below or add one }

avatar SavingEverything

The restrictions are very necessary to protect the consumers who choose to purchase gift cards from stores, or even prepaid Visa, Mastercard, AmericanExpress, and Discover cards. I still believe there should be no inactivity fees (such as $2.50 monthly fees if no activity after 365 days of activation/purchase of card)! And, activation fees (buying the card at a store) should be no more than $3.95, no matter what the denomination is (for VI/MC/AE/DSC prepaid cards)! Plus, there should be no expiration dates! Even though store gift cards are considered liabilities until the consumer uses the gift card to purchase products or services; they should be friendly to the consumer. For those prepaid cards, they’re ridiculous because not only do they charge a card to purchase, such as the Green Dot card, or the Amex card, or the Visa from your bank; but, the card issuer gets the interchange merchant fees every time you use the card for products and services (~2%). I just think we need regulation. I read somewhere that when banks were regulated in the 1980 and early 1990′s, transaction fees for balance transfers and cash advances were only 1.5% or 2% and had maximum charges; and NSF was $15. * Why wait until August 22? Can the new regulations be implemented sooner? That’s our House and Senate. Ridiculous that they cant do it sooner!

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