I
gave a retail gift card to my nephew last year. My well kept
19-year
old nephew usually feels he is being financially starved no
matter how
much money he is given. So the worry of the gift card expiring
or incurring large fees was not my concern, he rushed to the
store to use it the next day. What is my concern is that many
people who buy and receive gift cards, be it retail cards or
bank cards, do not understand the limitations posed by these
cards. This is evident from the ever-increasing complaints
to consumer bureaus.
Most people don't understand that when you purchase a gift
card they
are not necessarily equal to the cash paid for them over
time.
This is especially true of bank or mall gift cards. Mall
gift cards are
bank gift cards sold by a shopping mall complex.
To understand gift cards you should understand the following:
1. There Are Different Types
As mentioned before there are two types; the retail (store
gift card)
and the bank gift card (also mall gift card). There are marked
differences between the two. Retail cards are the least expensive
as
far as fees are concerned, bank cards offer the highest potential
for decreasing value over time due to the fact that many
have excessive fees.
2. How They Are Used
Retail cards can be used at the store you purchased them
at, and
sometimes a sister store. Bank cards can be used anywhere
bank
cards are accepted and sometimes at ATM machines.
3. How They Make Their Money
Retail stores make their money from the purchase you make
with
your gift card. With bank cards its a whole different story.
The bank
cards make their money from the extensive fees charged for
purchasing,
owning, and using the card.
4. Fees Charged Can Be Hefty
Some retail gift cards charge a monthly non-use fee and
will not replace
lost or stolen cards, and may expire. Most bank cards charge
a processing fee, a replacement card fee, an ATM fee, a telephone
inquiry balance fee, a monthly maintenance fee, an expiration
fee and some charge a fee to re-load the card.
5. You Can Counter The Fees
Before you buy a retail or bank card, read the fine print
on the
gift card, card jacket, or website. Understand the fine print
and
the cost associated with your particular card. Each card
has a different set of rules.
Summary
Fees are usually charged with gift cards, much more so with
bank cards than with retail cards. If you are given a gift
card,
use it right away. If you if you plan to give a gift card
and you
don’t think it will be used right away, give cash.
Cash is still
the least expensive, universally accepted gift.
Lois Center-Shabazz is the founder of MsFinancialSavvy.com
and author of the 3-time award-winning personal finance book,
Let's Get Financial Savvy! ISBN #0971979502.
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