What do the gift card provisions of the Credit Card Act mean for you?

Everyone in the gift card industry has been speaking of the recent gift card regulations approved by the Federal Reserve and we decided to chime in as well. So far every state has had its own rules about gift card expiration, dormancy and service fees but there hasn’t been a clear federal rule. It’s high time that the Fed acted to protect the consumer from unexpected gift card fees!

To summarize the new rulings that go into effect on Aug 22nd 2010 –

· Dormancy, inactivity, and service fees must be clearly disclosed upfront and may only be assessed only after at least 1 year of activity and even then only one fee can be charged per month.

· Expiration date cannot be less than 5 years

While we are excited about what this means for the prepaid gift card industry and especially open-loop gift cards (i.e. the VISA, MasterCard cards) that can be used in place of cash at any retailer we don’t see much of an impact to the closed-loop (retailer-specific) gift cards. Most national retailers don’t have expiry dates on their gift cards and do not charge monthly service fees primarily because most of these retailers operate in that state of California which does not allow expiration dates and service charges.

The more interesting statistic though is that 50% of Americans have at least 1 unused gift card and the average number of cards is 3.7. Statistics show that if a card is not used within the first 3 weeks of being purchased or gifted it is forgotten! So yes the extension of the expiry dates and no service fees help but don’t let it give you more reason to forget your gift cards.

Get value out of the gift cards that you receive today - exchange them for cash or a gift card to another retailer that you frequent more often!

Did you know you can get cash back from retailers?

Are you a California resident? Did you know that effective January 1, 2008, any gift card or gift certificate with a cash value of less than $10 is redeemable for its cash value? In other words, if you have a Macy’s gift card with $8.17 of value remaining, you can walk into any Macy’s in California and demand that they buy the gift card back from you – for $8.17.

It might seem tedious to go back to the store to get less than $10 back but it could add up – with almost $90 Billion in gift cards sold every year, and more than 10% of that value going unused, some of you folks might be sitting on quite a bit of cash. Check those sock drawers and that kitchen cabinet where you stash all your coupons – it might just be worth making a trek to those stores. (Btw if you find cards that are larger in value, you can sell them directly to us at www.mercardi.com. We’re also paying cash.)

But the deal might get even better. Senator Corbett just last month introduced Senate Bill 885, which suggests that this $10 threshold be upped to $20. Retailers sure won’t be happy about this, but this would be great news for California consumers. We’ll just have to wait and see how it pans out.

For more detail on CA laws related to gift cards, check out http://www.dca.ca.gov/publications/legal_guides/s-11.shtml