Want to save money on gift card buying? Ask yourself some key questions, do a bit of homework and your extra effort can mean extra cash in your pocket.

Americans spend about $25 billion on gift cards each year, but too often, they don't put much thought into buying them. They'll snag a half-dozen cards at the gift card mall in their local grocery store without thinking about whether they might be able to get it cheaper somewhere else. That's a mistake.

If you treat buying a gift card the same way you treat buying an HD television or a refrigerator -- carefully considering which one best fits your needs and then shopping around diligently for the best deal -- you can steer clear of unnecessary fees and other costs and get the biggest bang for your gift card buck.

To get started, ask yourself the following questions:

  • Should I buy a gift card that can be used anywhere?
  • Do I have to pay full price for the card?
  • Can I replace the card if I lose it?
  • Do I have to have the actual plastic card?
  • Can I save the recipient some money, too?
  •  1. Should I buy a gift card that can be used anywhere?
    People love general-purpose (or open-loop) gift cards. These cards that bear the logo of Visa or another credit card payment network, are as good as cash because you're not limited to a single retailer or store like you are with retailer-specific gift cards. You can use them anywhere you can use that network's credit card.

    Problem is, they're also more costly. Purchase fees for Visa, MasterCard and American Express gift cards can add an extra $3 to $7 to your cost.

    Solution: If you know your friend or relative loves Target, for example, consider a Target gift card. If they just bought an iPod, get an gift card for the iTunes store. It'll limit their choices, but you can save yourself money while still being confident that the recipient will enjoy the gift.

     2. Do I have to pay full price for the card?
    In anticipation of another slow holiday, many retailers have not only dropped purchase and shipping fees for gift cards; they're selling them at a discount. Want a Macy's card? You can spend about $42 to get a $50 Macy's gift card from GiftCards.com. "That kind of discounting on gift cards has never existed before," says Daniel Horne, a professor of marketing at Providence College. "You'll see a lot of it this year because the market has become much more competitive. Gift card sales were slow last year and retailers are getting creative with incentives."

    Solution:  Before you buy that card at the grocery store's gift card mall, do a little Googling to see if you can find it cheaper online

     3. Can I replace the card if I lose it?
    If a card is lost or stolen, it can often be reactivated with the remaining balance if the recipient can show proof of purchase. If you don't have proof, you're probably out of luck. Fees for reactivation vary. Some retailers offer it free, but it can cost $15 to replace a lost Visa gift card.

    Solution: Stash all of your gift card receipts in one drawer or envelope so you'll know where they are, and then don't throw them out until well after the holidays.

     4. Do I have to have the actual plastic card?
    Sending a gift card via e-mail saves time and shipping fees. It also provides an electronic copy in case a card is lost or stolen. Virtual gift cards (or "e-cards") are starting to take off. Most retailers -- Barnes & Noble, Urban Outfitters and Target, to name a few -- offer them for online purchases only. Customers who want to shop in their stores have to wait a few business days to receive a plastic version in the mail. That usually requires a shipping fee, though Urban Outfitters ships gift cards free.

    This holiday season, several chains are offering virtual gift cards that you can use either online or in-store. At the Web sites of JCPenney, Sears, Nordstrom and Nieman Marcus, for example, you can order a gift card that will appear within hours via e-mail, with a link the recipient can click to start spending online and a PDF attachment they can print out and take to the mall. Most retailers promise to e-mail the virtual card within a certain number of hours. Nordstrom, for instance, promises a card within four hours of credit approval.

    A major benefit of virtual cards is immediacy. Last-minute shoppers are no longer obligated to wait for a gift card to arrive in the mail or pay for expedited shipping. They can purchase and e-mail their gift within 24 hours -- or print it out and slip it into a greeting card.

    Solution: Check out retailers' Web sites to see if they offer virtual gift cards, but be sure to read their rules as well.

     5. Can I save the recipient some money, too?
    Fees can nickel and dime the life out of a gift card. To avoid this and do your loved one a favor, look for information on expiration dates and dormancy fees -- small amounts of money subtracted from the value of a gift card after an extended period of inactivity -- under "terms and conditions." Most major retailers have waived such fees on their own gift cards (see our gift card comparison chart for more information), but American Express and Discover are the only options for a general purpose card that will hold its value indefinitely.

    Discover's gift cards don't expire but do feature a "valid-through" date. When the "valid-through" date passes, the card can no longer be used. However, Discover will replace the card for free if you give them a call, and no funds will be lost.

    American Express' policies are more straightforward. AmEx waived after-purchase fees on Sept. 30, 2009, which means your nephew can drop his American Express gift card behind the dresser, find it in 2015, and still be able to spend the full $50 value of the card. American Express charges $4 to $7 to buy a gift card, and they do not expire.

    AmEx's policy moves are indicative of the changing landscape of the gift card business. The Credit CARD Act of 2009 -- landmark credit card industry reforms passed in May of 2009 -- also addresses gift cards, setting limitations on gift card dormancy fees, expiration dates and other terms. Among the changes set to be enacted in August 2010 are the following:

    • Dormancy fees can't be imposed unless the card has been inactive for at least 12 months. After that, only one such fee could be charged each month, and the issuer's policy on dormancy fees must be clearly disclosed.
    • Disclosures about all dormancy fees and other service charges must include the amount of such costs and the frequency of their application. The disclosures must be made before the consumer buys a gift card "regardless of whether the certificate or card is purchased in person, over the Internet or by telephone."
    • Gift cards can't expire for at least five years after they were last loaded with money.

    Many issuers have begun to tweak their terms in response to the Credit CARD Act, but many haven't. That means that offers can vary a great deal from issuer to issuer or store to store.

    Solution: Scour the fine print and steer clear of too-high dormancy fees and too-soon expiration dates. The recipient of your gift card will thank you.

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