Consumer Reports: Beware of gift card pitfalls

Some gift cards charge activation, inactivity fee

When you're stuck for a gift idea for someone who has everything, giving a gift card might seem just the thing, but Team 10 troubleshooter Cristin Severance explains many of those who get gift cards never use them.

"Five years ago I got these from my brother," said Consumer Reports employee Rich Handel. "I still haven't used them."

The group of employees is hardly a scientific sample, but their experiences show why buying gift cards may be a waste of money.

"Believe it or not, it's estimated that $1.8 billion worth of gift cards purchased last year are gathering dust and are likely never to be redeemed," said Anthony Giorgianni, who is with Consumer Reports.

While recent federal legislation requires retailers to honor cards for five years, monthly inactivity fees can kick in after a year, draining the value of the card long before it expires.

Gift cards with bank logos like American Express or Visa can be used at a wide variety of stores, but there is often an activation fee or purchase charge, usually around $4 to $6.

"Lost cards are another headache," said Giorgianni. "Several big retailers, such as Abercrombie and Fitch, Puma and Aeropostale say they won't replace them. Other retailers may charge you a hefty fee."

For instance, with the Visa card you can get at Simon malls, you'll shell out $15 to replace a lost or stolen card.

"One more drawback, don't expect the same fraud protections you get with traditional credit cards," said Giorgianni.

It is another reason why Consumer Reports says use gift cards as soon as you get them.

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