U.S. RETAILERS Fees put crimp in gift cards

If not used quickly, some gift cards can decrease in value.
NEW YORK (AP) -- Like more and more holiday shoppers, Juliette Coulter of Dallas thinks the right gift for many friends and family members is plastic and fits in a wallet.
She's spending $300 in all this season on gift cards from Target, Old Navy, Starbucks and other stores. It means no worrying, for example, about size or style for a pair of nephews age 9 and 14.
"They have very specific tastes, and I don't want to get them the wrong thing," she said. "I want them to think I'm the cool aunt."
Gift cards are hotter than ever this season, with merchants expected to sell more than $17 billion worth during the holidays, or 8 percent of all business, according to the National Retail Federation. It actually helps them extend the selling season, as shoppers flood the stores after the holidays to redeem their cards and, the stores hope, spend a little more.
Yet as the cards become more familiar, many recipients are grumbling about some headaches associated with them -- fees that can erode their value if they are not used quickly, problems getting replacements if they are stolen or lost, what to do with that last few dollars or even cents of credit.
Revising policies
Aware of the issues, and fearful of losing what has become a key piece of business, some store chains are revising their policies or doing more to educate customers about how to get the most out of gift cards.
Coulter said she doesn't worry about card fees as her recipients use them quickly -- which is often the only way to make sure you get full value.
Dennis Fish, of Atlanta, learned that the hard way.
Fish bought a $120 gift certificate from a spa for himself and his wife last year. They waited just over a year to use it -- and were hit with a 20 percent "reactivation" charge. The card had a one-year expiration period.
"Never will I buy one again until I know the ins and outs of the policies," he said.
He complained and got the charge lifted. But he's buying just two cards this year, compared with 10 last year.
Brad Ferris of Washington said the cards "drive me nuts."
"If you get a $300 card and you only purchase $250, you end up forking out more money to these stores because they don't refund the cash you don't spend," he said. "I always receive these cards, and they end up being more of an expense than a gift."
What you'll find
Besides reactivation fees, some store cards carry a kind of reverse-interest that's charged over time. Bank-issued cards often have an initial charge.
"Consumers are going to find out that their gift cards are not worth as much as they thought they were worth," said Gail Hillebrand, senior attorney at consumer advocacy group Consumers Union of U.S. Inc.
Her group supported legislation passed in California eliminating virtually all gift card and gift certificate fees effective January 2004. That state already has a law that keep cards from having expiration dates. In New Hampshire, cards that have a $99 value or less can be used anytime, while in Massachusetts, any gift card is valid for up to seven years.
Retailers say reactivation and other fees help cover costs to maintain the systems that track card credits, and are fair because the costs thus are charged only to consumers who delay in using them. There can be accounting costs, since stores don't record gift card sales on their final books until the cards are redeemed, according to the National Retail Federation.
Some have dropped them
But they are sensitive to the growing chorus of complaints. Several major chains, including Sears, Roebuck and Co., Barnes & amp; Noble Inc. and J.C. Penney Co. Inc. have eliminated fees in time for the holiday season. Back in February, 18 national retailers -- including Bloomingdale's, Toys "R" Us and Target Corp. -- agreed to replace customers' lost, stolen or damaged gift cards.
C. Britt Beemer, chairman of America's Research Group, based in Charleston, S.C., said gift cards have become the "grand slam" of the 2003 holiday season.
According to Bain & amp; Co., card sales for 2003 will total anywhere between $42 billion to $45 billion in sales this year, up from $36 billion to $38 billion in 2002. Exact figures are hard to determine.
Stores like gift cards because they cut down on returns -- and about two-thirds of recipients spend more than the value of the cards, according to Rob Markey, a director at Bain.
They also increase sales of regular-price items, because shoppers using a card are less interested in getting a discount.
Michael Brown, a retail operations specialist at Kurt Salmon Associates, estimated that about 10 percent to 15 percent of the value of the cards are never used.
Hillebrand, at Consumers Union, knows how gift-givers can prevent that from happening.
"Write a check," she advised.