Gift Cards. In the Mouth
Too many card issuers take a bite out of your gift before the recipient can spend it. Here are the fees to avoid
By Judy Feldman

(MONEY Magazine) – Ahh, gift cards, the shopping solution of least resistance. Little wonder that consumers spent $45 billion on 'em last year—and will purchase an estimated $60 billion worth this year. But buyers beware: Gift cards can be larded with hidden costs that most givers have no idea they're foisting on family and friends. Many cards expire in as few as nine months, and some can only be reactivated for a fee. Others can be dinged $2 or more each month if the recipient doesn't use the card within a certain amount of time. Maybe you want cash back on the unspent amount? Fuhgeddaboutit with most cards. A study by market researcher Synergistics found that up to 20% of recipients of prepaid gift cards never tap the entire value of their card. That's leaving some $4.5 billion a year on the store counter, by one estimate.

Two dozen states have recently curbed or regulated fees and other penalties. (See where your state stands—or sits—on annoying gift-card charges at But the tough news for consumers is that more and more gift cards are being issued by the national banks, which argue that state laws don't apply to them. Congress should clarify the rules. Otherwise, says Synergistics CEO William McCracken, the cards will continue to be "the gift that keeps on taking." —JUDY FELDMAN