The holidays have come and gone, and there have been some really good deal on gift cards over the holiday season. That’s not surprising – retailers love gift cards, and promotional deals with gift cards are a fantastic way to bring in more customers, and ensure that they spend money at your store.
One of the most popular promotions, especially at restaurants, was the “spend X dollars, get a X dollar gift card” promotion. Here’s an example of how this promotion works. You go to a store that sells Target gift cards, for example, and they tell you that if you spend $100 on items at the store, you get a $20 “bonus” card, which you can spend on whatever you want!
Essentially, that means you can spend quite a bit on gifts for other people over the holidays, and still benefit by getting yourself a little “something extra”. Customers benefit by getting some great deals on items they were going to buy anyway, and retailers benefit because they know that the extra gift cards will be spent at their stores – and customers will probably spend more than the gift card balance.
Sounds like a perfect promotion, right? Everybody wins!
Well, that’s not quite the case. Just like with most promotions, retailers use fine print to make sure that they can reap the maximum benefits from these promotional “gift cards”, and this often leaves consumers in a bit of a lurch.
In this article, EJ Gift Cards will examine these “bonus” gift cards – and discuss why they may not be the fantastic deal that they initially appear to be. Let’s get started.
Understanding The History Of Gift Card Protections
Before we discuss the details about how these “bonus” gift cards work, it’s important to know a little bit about the history of gift cards in America. Here’s what you need to know.
Before 2009, the world of gift cards was pretty much unregulated on a national level. There were no overarching laws in place to deal with things such as gift card expiration dates, service fees, and other such regulations.
Usually, these laws were determined mostly on a state-to-state level. For example, gift cards issued in California do not have expiration dates under California law – they can be used as long as they are still valid and redeemable.
This led to quite a bit of gift card “breakage.” Essentially, customers were buying gift cards with the intention to redeem them, but they were often hit by service fees, tight expiration dates, and other issues that made them difficult to use.
The “breakage rate” of gift cards in 2008 hit an all-time high of about 6-8% – an enormous number of gift cards were being purchased, and were never being used. For comparison, the breakage rate was about 0.75%, as of 2015.
This was a bad thing for consumers and businesses alike. Consumers did not trust gift cards, and had a hard time understanding when they had to be used, and businesses had to keep large amounts of assets on-hand as collateral for the “unsecured debt” of gift cards that had remained unspent.
So, what changed to make gift cards easier to use and understand for consumers? The Credit Card Accountability Responsibility and Disclosure Act, also known as the Credit CARD Act of 2009.
This act was designed to simplify quite a few aspects of credit, debit, and gift card use on a federal level. Within it were hundreds of individual provisions, but we don’t have to be concerned about most of them. We just need to understand the protections this act gives to consumers.
The Credit CARD Act Sets Forth Strict Rules For Gift Card Use
The Credit CARD Act was truly a watershed moment in the world of gift card retailing. It contained a large number of consumer-friendly legislation. The two most important provisions are these:
- Gift cards cannot expire before 5 years from the date they were issued – Until this provision was passed, there was absolutely no minimum federal requirement for gift card expiration dates. Now, after the CARD Act, all gift cards must remain completely valid for up to 5 years after they were issued.
It’s important to note that state regulations overrule this provision if they are more generous – for example, if a retailer sells Apple Store gift cards or sells Nordstrom gift cards in California, they will not expire, despite the federal 5-year expiry date provision of the CARD Act.
By passing this law, the US Government made it much easier for people to understand when their gift cards would expire, making it much simpler to buy and use gift cards.
- Fees cannot be collected from inactive gift cards until they have been unused for more than a year – Before this law was passed, service fees for gift cards were very common. Even after just a month or two of inactivity, companies could begin draining funds from gift cards regularly – eventually resulting in a valueless or very low-value gift card, even within just a year.
The Credit CARD Act changed this. It is now illegal for service or inactivity fees to be collected from store-issued gift cards until they have been inactive for at least a full year. Again, state laws may vary, and take precedence over this federal law.
Together, these two laws made it much easier to understand what you’re getting into when you buy gift cards online, or go to a store that sells gift cards. You will always be able to spend a gift card within 5 years of purchase, and retailers cannot take out service fees until you’ve been inactive for a full 12 months.
So, how do retailers exploit this system, and offer bonus gift cards that expire more quickly, or have service fees associated with them? Here’s what you need to know.
“Bonus Gift Cards” Often Aren’t “Gift Cards” At All – Exploiting Loopholes
The provisions laid out for consumer protection in the Credit CARD Act of 2009 do have a loophole. They are intended only to protect consumers who buy gift cards directly. They do not cover gift cards that are issued for promotional, loyalty, or “bonus” reasons – as long as they are not called “gift cards”.
In fact, you’ll see this in most of these promotions. The “gift card” you’ll get with your purchase is often called a “freebie” or “bonus” card, a prepaid card, a reward/promotional gift card, or even a “loyalty reward card”.
By using this fuzzy terminology, retailers and restaurants take advantage of this loophole in consumer protections. They can essentially sell gift cards that do not abide by Credit CARD Act regulations.
“Bonus” gift cards of this type often do not have any expiry date restrictions, for example. They could expire as soon as a month after purchase, and a 60-day window is the most common for promotional gift cards.
In addition, some of these bonus gift cards restrict what products or services you can spend them on, unlike traditional gift cards which can be spent without any restrictions. A bonus gift card for a restaurant, for example, could only be spent on menu items, and not alcohol.
Now, this does not necessarily mean that “bonus” gift cards are a bad thing. Properly used, you can still enjoy full benefits from them, just like you would from any other gift card. You just need to pay a bit more attention to the fine print, and understand restrictions, fees, and service charges that may be associated with them. Here are some of our top tips.
Our Tips For Using “Bonus” Cards Properly
If you have a “bonus” gift card from one of these special promotions over the holidays, you may be wondering how, exactly, you can protect yourself, and avoid losing money when your card expires. Here are our top tips:
- Read the fine print yourself – Whenever you see one of these “get a $X gift card when you spend $X at our store” deals, you should immediately be a bit suspicious – you will almost certainly get a promotional gift card. However, you should also get the information about the card’s usage terms along with it. This is often printed on the receipt, or available on the website of the retailer or restaurant that sells gift cards.
Take the time to find this fine print, and read through it yourself. That way, you’ll know exactly how long you have to spend a gift card, and you will understand any other terms and conditions that may apply to it. Doing this as soon as you get the gift card will ensure that you do not waste it by letting it accidentally expire, or lose money from inactivity fees.
- Use the card yourself ASAP – In our opinion, this is the best way to use “loyalty” or “bonus” gift cards. Don’t risk letting your card expire if you don’t understand the fine print!
For example, if you go to GAP, and they let you know about a “Get $20 when you spend $100” deal, you should take advantage of the deal! Then, after you get your promotional gift card, you should spend it as soon as you can on more gifts, or on a new piece of clothing for yourself!
By using the gift card on yourself immediately, you can avoid many of the common issues with these “bonus” cards. However, there is a caveat. You usually need to wait a day or two, as most restaurants forbid bonus gift cards from being spent on the same day that they are acquired.
- Use the balance for charity – If you have a gift card that’s expiring soon, but you don’t know what to do with it, you can spend it on charitable donations! We don’t recommend giving the card itself to a charity, as they may not be able to spend it in time.
But, for example, if you have a gift card to a popular grocery store, you could spend it on a bunch of canned food, and donate it to your local food bank! And if you have a gift card to a clothing store, you could buy basics like socks and underwear, and donate them to a local homeless shelter. The choices are limitless!
- Make sure a gift recipient knows about restrictions – If you still plan on giving away the bonus gift card you’ve received, it’s doubly important to read the fine print of the promotion, and make sure that you explain it to your gift card recipient.
Everybody loves gift cards as a present, but if you give a promotional gift card and it expires before your recipient can use it, they will probably be confused, and more than a little bit disappointed. Let them know when the card expires, to make sure that they understand their gift and can use it appropriately.
With these 4 tips, you should be able to take full advantage of your promotional gift cards. Though you usually can’t sell these gift cards on EJ Gift Cards, there are plenty of other ways to get your money’s worth!
Don’t Get Blindsided By Promotional Expiration Dates – Follow This Guide!
With this guide to promotional gift cards, you should be able to fully understand what “bonus” gift cards are, and how they differ from standard gift cards sold by retailers. At EJ Gift Cards, we’re gift card experts – and we buy and sell gift cards from hundreds of retailers.
If you’ve got a gift card that you don’t want, and you’d like to turn it into cash, you can sell it with our simple, step-by-step process, and get paid over PayPal! Or if you are looking for great deals, you can visit our gift card marketplace and buy gift cards! You’ll get deep discounts on the most popular gift cards around!
Either way, you save money – and you win! So visit EJ Gift Cards today, and see what we can do for you.