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Gift Cards & Gift Certificates
The Attorney General provides Consumer Alerts to inform the public of unfair, misleading, or deceptive business practices, and to provide information and guidance on other issues of concern. Consumer alerts are not legal advice, legal authority, or a binding legal opinion from the Department of Attorney General.
GIFT CARDS & GIFT CERTIFICATES
According to the National Retail Federation, consumers spend approximately $25 billion on gift cards during the holiday shopping season. Despite the ease and popularity of gift cards, there are drawbacks to consider before purchasing or using gift cards.
THE DIFFERENCE BETWEEN GIFT CARDS AND GIFT CERTIFICATES
Gift cards, sometimes referred to as "smart cards," represent a stored value of money. The card has information stored in a magnetic strip or a microprocessor chip. It is similar to a debit card, except gift cards are not tied to a consumer's bank account. The two broad categories of gift cards are merchant-issued gift cards or bank-issued gift cards.
A consumer who purchases a merchant-issued gift card indicates how much they want to spend, and in return, the merchant should disclose any applicable fees, charges, expiration dates, and other restrictions. The gift recipient may then use the gift card toward purchases at that merchant or other participating merchants. Some merchants place restrictions on use of the card - for instance, the card may only be used for online or in-store purchases. Some gift cards have pins on the back of the card that should only be revealed by the purchaser or recipient at the time they would like to use the gift card to make a purchase.
A gift card issued by a bank or other financial institution contains an identity symbol for a card network such as American Express, VISA, or MasterCard. Usually these bank-issued cards can be used at any location accepting credit or debit cards from that network (ie. locations accepting VISA, American Express, and/or MasterCard). The banks that issue these cards are required to provide consumers who purchase and receive their cards with disclosures related to fees, charges, expiration dates, and other restrictions. The Office of the Comptroller of the Currency (OCC), which is responsible for regulating national banks, has gift card disclosure guidelines that national banks must follow. The guidelines publication is available at http://www.occ.treas.gov/ftp/bulletin/2006-34.doc
A gift certificate represents the right of the person named on or holding it to present the certificate to the referenced merchant for goods or services. The main difference between a gift card and a gift certificate is a gift certificate does not come with the "smart card" technology but, instead, is recorded on paper and sometimes resembles a check.
MICHIGAN AND FEDERAL RULES REGARDING GIFT CARDS
Here are answers to frequently asked questions about Michigan and federal rules regarding gift cards:
1. Can the gift cards that I buy expire?
In general, gift cards purchased after August 22, 2010, cannot expire within five years of purchase. That means a merchant that issues a gift card cannot refuse to accept a gift card "for personal, family, or household use" if you present the card within five years from the time it was purchased or value was added to a gift card. But a merchant can refuse to accept a gift card that was issued more than five years ago, if the terms and conditions were clearly and conspicuously disclosed and one of those terms and conditions was an expiration date of at least five years from the date of issuance.
If you purchase gift cards before August 22, 2010, the big exemption to the general rule that gift cards cannot expire within five years of purchase are cards issued by banks or financial institutions. That means that, under Michigan law, financial institutions that issue gift cards can put an expiration date on a gift card, and that gift card can expire in less than five years. However, after August 22, 2010, even gift cards issued by banks or financial institutions cannot expire in less than five years.
The bottom line: Before you purchase a card, be sure to ask about expiration dates or other terms and conditions before purchasing any gift cards. If expiration dates or other terms and conditions are not easy to spot, don't buy the card.
2. What should I look for when buying a gift card from a merchant?
Although the following list is not exhaustive, as of November 1, 2008, Michigan law now prohibits merchants from doing any of the following:
Also, starting November 1, 2008, a merchant cannot charge an inactivity or other service fee and deduct it from the value of the gift certificate. However, merchants can charge a fee in connection with purchasing the card, but they can't deduct it from the value of the card. For example, a merchant can charge you a $1 gift card purchase fee at the time you buy a $25 gift card, but they can't deduct this fee from the value of the card (ie. they can't give you a $25 gift card with only $24 on it). If you buy a $25 gift card, $25 should remain on the card unless you use it to purchase something.
Keep in mind that, for cards purchased before August 22, 2010, all of the prohibitions discussed in this FAQ do not apply to gift cards issued by financial institutions (among others). But all fees or terms and conditions should still be clearly and conspicuously disclosed to you at the time of purchase. If they are not, don't purchase the card. After August 22, 2010, financial institutions cannot charge inactivity or service fees on gift cards that they issue within a year of purchase. After a year of purchase, they may charge fees, but they cannot charge more than one penalty per month.
3. Are there exemptions to the state and federal gift card laws?
Yes. As mentioned above, gift cards or gift certificates purchased before August 22, 2010 and issued by financial institutions are not required to comply with most of the new gift card laws. Some of the other exemptions are:
4. What can I do to make sure I am getting the best deal when I buy a gift card?
As with any other purchase, consumers should shop around before buying gift cards to make sure they are getting the best deal. For example, if you would ordinarily purchase a gift card from a mall, and the gift card the mall sells is issued by a financial institution which charges fees, ask yourself if all of those terms and conditions are really worth the relative ease of buying that card. And why would you buy the card from the mall, if you can purchase a merchant-issued card from the recipient's favorite store in the mall without worrying about inactivity fees or short expiration dates? Or why not give cash instead?
Merchants compete for your business, especially during the holiday shopping season. Use this competition to your advantage - always be a smart shopper, and do your homework before you buy. For more tips on what to look for when shopping for gift cards, please see the gift card buying guidelines below.
5. What tips should I follow to protect myself when purchasing or receiving a gift card?
6. What should I do if the merchant who issued my gift card files for bankruptcy?
You should contact the merchant to determine if it is still accepting gift cards. This information may also be available on the retailer's website. Even if the merchant is not currently accepting gift cards, it may resume doing so later, so you should check with them periodically. The merchant's competitors may also be willing to honor the gift card.
GIFT CARD / CERTIFICATE BUYING GUIDELINES
FILE A COMPLAINT
If you are confronted with a business that you feel may have violated Michigan's gift card rules, or refuses to honor an expired gift certificate or card, please file a complaint with the Attorney General's Consumer Protection Division at:
Consumer Protection Division
Toll free: 877-765-8388
www.michigan.gov/ag (online complaint form)
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