Gift Card Facts and Safety Tips

[sameinanylingo.livejournal.com]

I just posted this in my journal and with it being the holiday season I thought it might be helpful to post it here too. It's not really "fannish", but it is an attempt to help spread the truth about a subject that affects "capitalism", which I'm sure most of us in this group support :)

As some of you may already know, my husband works for a company that handles all of the back end processing and facilitates gift card production for many of your favorite retailers across the globe.

The other night we happened to see this canned news story on our local Fox affiliate, which means it was probably shown in many markets, not just ours. It comes from an anual report from the BBB on how people can protect themselves against gift card fraud. However this idea has turned into a widespread story that gift cards are generally unsafe to buy and use. There are several things mentioned in the story that are flat untrue. The story is mainly focusing on the technical problems a man encountered with pre-paid Visa cards from a bank. But they portray it as a problem with gift cards in general and insinuate that gift cards purchased from retailers are subject to these same issues. Which is not the case. They are completely separate from each other. And despite what the story says, there are regulations in place to protect your purchase rights and prevent fraud. This story has caused a stir at the company where my husband works. People who know better are, quite obviously, a bit upset about this and are trying to head off any potential backlash that this may cause.

With that in mind I asked Tim to write up a piece on the facts so that I could share them and do my part to help.

Here's what he has to say:

You’ve probably heard of or seen stories on the web about how unsafe gift cards are to purchase and give as gifts during this holiday season (or anytime, for that matter). While there is always potential for fraud with ANY kind of payment instrument (whether it’s a gift card or a paper check), here are some facts relating to gift cards, fraud, and how they are still safe to purchase and use.

1. Yes, there are many, many scams involving gift cards. There have been for several years. In fact, there were (and still are) a variety of scams involving paper gift certificates. So this is nothing new. The company I work for has a Vice-President of Fraud Prevention and Loss, and we work closely with the FBI and U.S. Secret Service and local police departments to trace scams and prevent additional ones. In short, we’re aware of it and we’re working hard to keep it from happening.

2. Every year the Better Business Bureau puts out a press release about card fraud which also gives consumers some very useful tips on how to avoid getting fleeced on a gift card purchase. They include:

• Do not buy cards from an auction or online site other than the merchant’s. Chances are those cards were stolen and have no value on them. If you want to buy a Target gift card online, buy it only from the Target web site. Likewise, if you’re approached in a parking lot by someone asking you to purchase a gift card to support a charity, say no. Those cards have been stolen and have no value on them.



• When you do buy a card, keep the receipt. It has a record of the transaction and will be useful if the person to whom you give the card cannot use it.



• Ask the clerk or customer service desk if the card you purchase has an expiration date. Chances are good that it won’t (see what I have to say later about that), but some cards may be for special in-store promotions that end on a certain date. If no one in the store can answer your question, call the toll-free number on the back of the card.



• Check to see if there are inactivity or dormancy fees. Chances are good nowadays that there won’t be. See my next point.

3. Depending on the retailer and the state in which you purchased a gift card, there may or may not be dormancy fees on an unused balance. That is, if you have a card with a balance on it that you don’t use for a period of time (normally years instead of months), the retailer may charge a fee (likely just a few cents) against the card and lower the balance. Again, ask someone in customer service at the retailer, or call the number on the back of the card. However, several states have enacted laws (including here in Kentucky) that prohibit a retailer from charging a dormancy fee. So in Kentucky, for example, if you have given a gift card and the recipient has a 10-cent balance remaining on it, the retailer cannot charge a fee against it no matter how long that person has the card.

4. Several of the recent stories in the news on gift cards mention that they are unregulated. That is dead wrong. Gift cards are considered payment instruments and are subject to any state or federal laws. More states (including Kentucky) are enacting laws specifically for gift cards. The company I work for tracks what state legislatures are enacting and provides regular legislative update reports to our clients. One entire session at our annual conference deals with all gift card-related legislation pending and passed in states’ governments. And because cards are payment instruments, scams are considered to be wire fraud and mail fraud and are investigated by the local police departments, the FBI, the U.S. Postal Service, and U.S. Secret Service.

5. For many retailers, there is no expiration date on their cards, regardless on when they were issued. Target is one of them. However, some retailers may have issued special promotional cards that have an expiration date. When and if that happens, the expiration date is specified somewhere on the card.

6. Don’t confuse gift cards with pre-paid cash cards from Visa, MasterCard, Discover, or American Express. Those cards are issued and processed by banks for other financial institutions. In one story I saw on a station in our city, a guy described the problems he had with pre-paid Visa cards he bought for his girlfriend and his daughter. The story insinuated that those cards are the same as gift cards. They are not. While both types of cards are similar in that they carry a balance (and the potential for fraud is always there), the back-end processing for pre-paid Visas and others is performed by the issuing bank. Also, pre-paid cash cards may have an expiration date and the bank may charge dormancy fees on them. Again, ask about those things if you purchase one.

Gift cards are safe to buy and safe to give. Know the facts. Get answers. And keep yourself informed.