Giving gift cards? Understand pitfalls

NEW YORK (AP) — You buy your sister a $100 general purpose gift card. It’s for her birthday, but it might be the bank that has reason to celebrate.

Despite your good intentions, such gift cards often come with a tangle of fine print and fees that can ensnare unsuspecting recipients. Your sister might not realize that a $3 monthly inactivity fee kicks in after a year. Or it could annoy her that it costs $12 to replace a lost card.

While the new credit-card law passed this year includes some regulations for gift cards, it doesn’t eliminate many of the fees they often come with.

So before you start loading up on gift cards for the holidays, be sure you know the pitfalls.

There are two types of gift cards — store cards and general purpose bank cards. The latter are Visa, MasterCard or American Express branded cards that you can use wherever those credit cards are accepted. These are the cards that often come with a mess of fees and terms.

Unlike with gift cards to specific stores, there are usually fees to buy general-purpose gift cards. Chase and Wells Fargo cards cost $3.50 a piece. American Express cards cost between $2.95 and $6.95, depending on the value of the card.

Once a general purpose bank card is purchased, the clock on the expiration date starts ticking.

The card’s value could disappear even before the expiration date as a result of dormancy fees. Chase and Wells Fargo both start deducting $2.50 a month from cards after a year. So if left unused, a monthly fee could eventually deplete a card’s value.

If a card is lost or stolen, Chase charges $12 for a replacement card while Wells Fargo charges $7.50. There could also be fees of 3 percent or so on foreign transactions, as with many credit-card purchases.

One way to safeguard a general purpose gift card is to register it online; this will ensure you can get a replacement if it’s lost or stolen. You’ll need to report a missing card right away, however. If a thief goes on a spending spree with the card before then, you likely won’t get a refund.

The other major pitfall with general purpose cards is that people often don’t use up the balance. One reason is that people often don’t know how much is left on their cards, and merchants can’t look up the balance.

In addition, some stores won’t let you use multiple forms of payment if there’s not enough on your gift card to cover the bill. As a result, 10 percent of the value on bank cards is never used, according to the Consumer Federation of America.