The Downsides of Using Gift Cards

By Gerri Willis

Chances are, you are entering the new year with one or two gift cards in your wallet. That’s because for the seventh year in a row the No. 1 requested gift was gift cards, according to the National Retail Federation. In fact, more money than ever before -- $118 billion dollars -- was loaded onto gift cards, nearly 8 percent more than last year. Unfortunately, gift cards have downsides that many of the givers never even know about.

Although Congress tried to introduce consumer protections to the industry with the Credit CARD Act of 2009, there are still some limitations you need to know about. First off, they aren’t good forever. The value of a gift card you buy or receive today could fall by as much as $2.50 or more every month that the card sits unused. It’s called a dormancy fee or a charge for not using your card. (That fee can’t be levied until you’ve held the card for 12 months). What’s more, if you throw it in a drawer and forget about the card for five years, you could lose the entire value of the card.

Some vendors are trying to get out ahead of the pack. American Express, for example, announced last fall they would drop fees associated with all of their gift cards, including, dormancy fees, balance-checking fees and card replacement fees.

Still, there may be another problem with the card that could prevent you from using your card. If the vendor is a retailer you never frequent, you may let the card languish. Fortunately, there is a marketplace for selling cards online that may help you get at least some of that cash back., for example, will help you compare sites that offer exchanges for your gift card. The company vets players and picks a handful to promote. directs consumers to kiosks that take gift cards. These specialty kiosks take scores of cards from different retailers and pay 65 to 85 percent of the face value. You can set your own price for a gift card at, but the site takes a 15 percent cut when you sell it. As with any service offered online, you’ll want to check out the company providing gift card services. Look for online reviews and read the site’s policies.

In short, you have to manage a gift card just like regular money. Know how long it is good for and use it before you lose value.