Gift Cards Safer Than They Once Were, But Not Completely Safe

Each holiday season more people seem to purchase gift cards. They're easy, come in a variety of prices, and let's face it, they're just a bit less tacky than wrapping up a $50 bill.

But gift cards have always produced their share of post-holiday complaints. Sometimes they don't work. Very often fees eat away at their value if not used right away.

“I received a $100 American Express gift card for my birthday,” Marion, of Tuscon, Ariz., told ConsumerAffairs.com. “Although we have repeatedly verified that the balance is correct, three attempts to use the card to make a purchase have all failed. We have called customer service numerous times. Eventually we were told that Amex would mail a new card. Now days have passed with no new card and no resolution.”

Still glitches

While there are still glitches with some cards, the government recently adopted new rules for bank gift cards address the issue of fees. Now, these cards that are issued by American Express, Visa, Mastercard and Discover can't expire for five years after purchase. If you add money to a bank gift card, the new money can't expire for an additional five years.

The new rules also do away with inactivity or dormancy fees on bank cards until at least 12 months after the card was activated.

The new rules, which were part of the CARD Act that took effect in 2010, generally cover retail gift cards, which can be used to buy goods or services at a single merchant or affiliated group of merchants, and network-branded gift cards, which are redeemable at any merchant that accepts the card brand.

When giving a gift card, make sure to include the store or bank-issued activation receipt. This receipt will become very useful should there be a problem with the gift card. Make sure the recipient holds on to the receipt until all of the money on the card has been used.

Scam magnet

Gift cards, almost from the beginning, have been subject to theft and fraud. In the early days, retailers often displayed gift cards in racks out in the store.

Scammers were able to write down the account numbers and use the cards before they were sold. Once a recipient tried to use that particular gift card, they would find that it was worthless.

After the holidays unwanted or unused gift cards will sometimes show up in online classifieds, like craigslist. Most sellers and buyers are legitimate, but some may be scammers.

If consumers buy a gift card in this fashion, they should go to the store where the card is redeemable with the gift card seller. This way both parties can verify the validity and amount of money on the card. It would be very easy for a scammer to ask for an upfront payment and then send you a worthless piece of plastic.

If consumers are selling a gift card, the seller should never send the buyer the gift card number and PIN to verify the balance. Once a buyer has the gift card number and PIN, he can spend money online without ever paying for it.

If you are doing the selling, accept cash only -- a check or money order could be fraudulent. And, never give out personally identifiable information such as your Social Security number, bank account information and credit card numbers.