Do Gift Cards Depreciate? How They Lose Value

Gift cards function as a widely used form of stored value, offering a convenient way to give and receive purchasing power. While they represent a specific monetary amount, a gift card’s effective value can decrease due to various mechanisms that impact its accessibility or remaining balance. Understanding these mechanisms is important for consumers.

Reasons for Value Reduction

The effective value of a gift card can be reduced through several distinct mechanisms. One common way is the imposition of dormancy or inactivity fees. These fees are typically charged by the issuer when a card has not been used for a specified period. A fee may be deducted from the card’s balance, gradually reducing its value.

Another factor that can lead to a reduction in value is the presence of an expiration date. While many gift cards are protected by regulations that mandate a minimum validity period, some cards may still have a set date after which they become invalid. If a gift card is not used before its expiration, its entire value can be lost.

The physical nature of many gift cards also presents a risk of value loss. Unlike funds held in a bank account, a lost or stolen gift card often means the loss of its associated value. Without the physical card or proper records, recovering the balance can be challenging. Gift cards are treated much like cash.

Furthermore, the financial stability of the issuing retailer can impact a gift card’s worth. If the company that issued the gift card experiences financial difficulties, such as bankruptcy or goes out of business, the gift card may become worthless. Consumers might find themselves unable to redeem their cards if the merchant is no longer operating.

Consumer Protections and Regulations

To safeguard consumers from excessive value reduction, federal and state regulations have been implemented. Federal law, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, mandates that most retail gift cards and general-use prepaid cards cannot expire in less than five years from the date of issuance or the last time funds were added to the card.

The CARD Act also places limitations on dormancy, inactivity, or service fees. Issuers are prohibited from charging such fees unless there has been no activity on the card for at least one year. Only one fee can be assessed per month, and these fees must be disclosed to the consumer before purchase. These federal rules apply broadly to store-specific and general-use cards, providing a baseline level of protection.

Beyond federal mandates, many individual states have enacted their own regulations that offer even greater consumer protections. Some state laws prohibit dormancy fees entirely, while others extend the minimum expiration period beyond the federal five-year requirement. These state-specific provisions can vary significantly. Federal law preempts state laws only when the state laws are inconsistent and offer less consumer protection. Promotional cards or those issued as loyalty rewards generally fall outside the scope of these protections.

Managing Gift Card Value

Proactive measures can help consumers preserve the full value of their gift cards. Regularly check the balance and any stated expiration date on the card. Many issuers provide online portals or toll-free numbers for balance inquiries.

Using gift cards promptly after receiving them is an effective strategy. This reduces the likelihood of dormancy fees being applied or the card expiring. Prompt use also minimizes exposure to issues such as the issuing retailer experiencing business closure.

Whenever possible, registering gift cards with the issuer can provide an added layer of security. This can protect the card’s balance in case it is lost or stolen. Registering the card can make it easier to replace the card if it goes missing.

Carefully review the terms and conditions associated with each gift card. This fine print contains information about any applicable fees, expiration policies, or specific usage rules that could affect the card’s value.

For unwanted or partially used gift cards, consumers have options to convert them into a more usable form. Various online platforms specialize in gift card exchange or resale. These services allow individuals to sell their cards for cash or trade them for cards from different retailers. While these services may involve a percentage deduction from the card’s face value, they offer a way to recoup some value.