Many people find gift cards to be a convenient and thoughtful way to allow friends and family to choose their own presents during the holidays. While this may be true, the Pennsylvania Institute of Certified Public Accountants warns of some potential pitfalls to be aware of when giving or receiving a gift card.
· Know the seller. If you are buying a gift, you want to ensure that the recipient is able to use the card as intended. That is why it is important to purchase cards from reputable sellers. The Federal Trade Commission warns in particular against buying from an online auction because the card may be fake or may have been fraudulently obtained.
Even if the card is legitimate, during troubled economic times, you also want to know that the company is in good financial shape and unlikely to go out of business before the card can be used. If you hear about a possible bankruptcy at a major retailer, it is a good idea to redeem gift cards from that company immediately and to avoid buying any more cards from them.
· Check the fine print. Whether you give or receive a card, examine the terms and conditions so that you or the recipient can make full use of it.
For example, if the card was issued by a chain, can it be used in every store or only in the one where it was purchased? Is the card restricted to certain goods or services, or can it be used for any purchase?
And, most important, does the card have an expiration date? If it does, it is important for the recipient to be aware of it so the card doesn't expire before it can be used. The store may agree to extend the date on an expired card, so it is worth asking if you are in this situation, but be aware that they may charge a fee for this service.
· Ask about fees. In some cases, you may find the card may not be worth exactly what the buyer paid. That is because certain expenses may be deducted when it is used, including purchase fees, transaction fees, inactivity fees, and shipping and handling costs.
If you are buying the card to give as a gift, ask about these fees and whether the recipient will be stuck paying them. If you receive a gift card, check the terms and conditions to see if you can spend the card's entire face value.
· It's like cash! All stores will not automatically replace a gift card if it is lost or stolen. In fact, you may be out the money in this situation. Try to report the loss to the store as soon as possible, and inquire about their policies. It will help your case if you have the original receipt for the card, as well as the card's identification number.