The trouble with gift cards

They're a great last-minute Christmas present, but gift cards can be a waste of money.
 
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01 .Gift card grief

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While gift cards make a convenient present, they have been the subject of numerous complaints to CHOICE over the years.

Since we first looked at gift cards that quickly stop giving, people have continued to contact us with stories of cashed-up plastic that has ended up worthless. 

In this article you'll find: 

For more information about Shopping, see Shopping and legal.

Not so easy

About $1.5 billion worth of gift cards were purchased in 2009/10. About three in four participants in a November 2010 CHOICE survey told us they’d received at least one gift card in the past 12 months, with a similar proportion giving one as a present in the same period. More than half experienced the biggest pitfall of gift cards – it expired before they were able to use its full value. 

Under regulations in the US, gift cards must have an expiry date of at least five years. Under those regulations, good disclosure of pitfalls such as fees is also mandatory. 

In Australia, unfair contracts legislation can be used to take action against particularly unfair terms and conditions for gift cards. To share your story, please email us at money@choice.com.au or leave a comment.

Short changed

In late 2011 the Commonwealth Consumer Affairs Advisory Council (CCAAC), and released an issues paper that highlighted the problems in th gift card industry. And nothing's really changed in the $1.5 billion gift card industry since then. 

Back in November 2010, we found that most gift cards expire after one year. 

At the time, Bunnings offered the only card with no expiry date. Bunnings has now been joined by Toys R Us, EB Games and IKEA (Perth and Adelaide stores) in offering gift cards with no expiry date.

We welcome these changes, but most gift cards still run out too soon and can have hidden fees, charges and conditions.

"We know from the anger and frustration of consumers who try to get redress that new laws are needed," CHOICE spokesperson Tom Godfrey says.

 
 

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We recommend the following gift cards as they have no expiry date:

These cards cards do expire, but can be used for everyday items like groceries so you shouldn't have trouble finding somewhere to use them:

When buying a gift card

  • Make sure you read the fine print on the card. 
  • Look for a gift card:
    • with no expiry date
    • that can be used at a number of everyday stores 
    • that can be tracked if it gets lost.
  • Avoid gift cards with:
    • a short expiry date (less than one year)
    • conditions and restrictions (eg. the card can’t be used on weekends)
    • fees - for example, Visa and MasterCard gift cards often charge activation fees, and fees to call customer service.

The last word

“The only gift voucher I will accept is one issued by the Australian government,“ says CHOICE member Graham Brown. "These gift vouchers have so many benefits – no fees, no restrictions on where or when you can use them, and you can even use part of them and get change. The vouchers come in many useful denominations and combinations: $5, $10, $20, $50 and $100. The best feature is that they can be used anywhere in any way. Now when I am given an Australian government gift voucher, it goes with my own collection of vouchers in my wallet, and can be quite useful at any time I choose.“




  • Expiry date Will the card be honoured after its expiry date? There are only a handful of cards that do not expire. However, some stores may exchange expired cards for new ones or honour them even after they’ve expired. A large number of card providers allow a grace period (usually one month) after the card has expired. Be especially wary of cards that state only their issue date rather than the expiry date (they usually also state the time period for expiry after the issue date). 
  • Balance You should be able to easily check the remaining value on the gift card. While most allow you to do so via a website or dedicated customer phone number, some require you to check the balance in-store. Visa and MasterCard gift cards may charge you a fee if you ring customer service to check your balance.
  • Not honoured for transactions less than a specified amount Some cards cannot be used for amounts less than $5 or $10 - so if the limit's $10 and you have $9.50 left on your card, then your only option is to buy something more expensive and pay the excess. 
  • Lost or stolen cards You normally have to treat your gift card like cash – if you lose it, it’s gone. However, some retailers allow you to cancel and re-issue a card you’ve bought, sometimes for a fee. Conditions apply, so hold onto your receipts for gift cards and jot down details such as the card number.
  • Restrictions about which shops accept the card You can usually only use a gift card in a specific store or group of stores, such as the Coles Group & Myer gift card and Woolworths Wish card. Shopping centre cards can be used in a wider variety of stores, but note that they may not be accepted by all stores in the shopping centre.
  • Will you get change? For most cards, the answer is no, but you can use the card again for later purchases if you haven’t used the full amount. 
  • Fees and charges Fees are mainly a problem with Visa and MasterCard gift cards. Most retailer cards have no fees, but some cards charge an issue fee, or a fee if you want to extend the expiry period.

Beware Visa and MasterCard fees

Visa and MasterCard gift cards are available from your bank, retail stores or online. They can be used at most retailers or businesses that accept Visa or MasterCard, so they’re valid at many more places than other gift cards. But the downside is the fees.

  • There is usually a purchase fee ($4.95, for example).
  • There may be fees of up to $4.50 for checking the card’s balance over the phone (though it may be less expensive or free online, or automated phone services may be available). 
  • These gift cards usually expire after 12 months and any remaining balance is lost. Some cards allow you to reload them and don’t expire. However, read the fine print carefully, as reload and monthly fees can apply, as can a transaction fee every time you use the card. 
  • The retailer may also charge you a surcharge for using a Visa or MasterCard.

They usually must be treated like cash, although a few cards can be replaced if lost or stolen, so check carefully. 

Converting unwanted gift cards to cash

A new website, Cardlimbo, allows you to sell unwanted gift cards and buy second-hand cards discounted by up to 20% or more.

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