Gift cards make an easier present

More than three-quarters of Americans are expected to buy gift cards this holiday season. And why not? They are convenient, and you don't have to fight crowds at the mall or worry about finding just the right present or sweater size.

But there is another incentive to buying a gift card this year: more consumer protections.

The federal Card Accountability Responsibility and Disclosure Act that reformed credit card practices now limits some of the worst features of gift cards inactivity fees and expiration dates.

Gift cards must be valid for at least five years after purchase or since money was last added to the card, under the new rules that took effect this summer. An inactivity fee can be charged only after one year of nonuse. And even then, no more than one fee per month can be assessed.

In addition, some states have gift card laws that provide extra protection. Maryland, for instance, doesn't allow fees in the first four years on store-brand cards sold or issued in the state.

Still, all cards are not alike.

"Gift cards are better than they used to be, but there are some pitfalls that consumers need to be aware of," says Greg Daugherty, executive editor of Consumer Reports.

So, whether you are giving or getting a gift card this season, here are some tips:

Retail vs. general purpose Retailer cards can be used only at a specific merchant. General purpose cards, usually carrying the Visa, MasterCard or American Express brand, can be used anywhere.

Stick with the retailer card, says Judd Lillestrand, founder of ScripSmart, a website that rates hundreds of gift cards.

Retailer cards typically don't have inactivity fees or expiration dates. General purpose cards usually charge an upfront fee of $3.95 to $5.95, Lillestrand says. And a recent survey found that five out of eight general purpose cards assess a monthly fee after 12 months of no activity.

One caveat: Avoid financially troubled retailers. "If you buy a gift card for a specific store and the store goes bankrupt, you don't have any protection. You're just another creditor," Daugherty says.

ScripSmart offers alerts when retailers have filed for bankruptcy so consumers can quickly use their cards.

Spend ASAP If you receive a card, spend it as quickly as possible, or at least within the first year, to avoid inactivity fees.

Sell unused cards Maybe you received a gift card to a restaurant that's nowhere near where you live. Rather than let it collect dust and expire, sell or trade it online.

Numerous sites, such as Plastic Jungle, Cardpool and Maryland-based will buy a card from you at a discount or let you trade it in for another. Plastic Jungle, for example, offers to pay $90 for a $100 Target gift card. You also can buy cards at a discount of up to 30 percent on the sites.

Make sure you deal with a reputable site that offers a money-back guarantee, just in case the card you receive isn't what was promised.

Give cash Cold, hard cash has many advantages over plastic money: No fees. No expiration. No restrictions. And people are less likely to misplace cash or forget about it, Daugherty says.

Not so with gift cards. A recent Consumer Reports survey found that more than one-quarter of those who received a gift card last year still hadn't used it because they didn't have the time or forgot about it.

Cash might seem more impersonal than a gift card. But Daugherty suggests going to the bank and getting crisp new bills that you can put in a card. "It will seem special," he says.

Gift cards and federal law

Besides limits on expiration dates and inactivity fees, new federal rules:

•Require terms to be disclosed on cards. One exception: Congress allowed millions of old cards produced before April 1 to be sold, rather than destroyed, even though they don't have the mandated disclosures. But all gift cards must have the proper disclosures by Jan. 31.

•Apply only to retailer-issued cards and network-branded cards that often bear the Visa, MasterCard or American Express names. Doesn't cover reward, rebate or other promotional cards.

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