Gift Cards Still Have Pitfalls, Despite Better Consumer Protections

(MoneyWatch)  Gift cards take much of the spirit out of gift-giving -- the thoughtfulness extends little further than choosing a dollar amount and maybe a specific merchant -- but there's no denying the popularity of the convenience they offer.

Consumers bought $25 billion worth for holiday gifts last year, according to Bankrate.com. If you choose to go that route this year, remember that the key to sound gift-card shopping lies in understanding the terms governing their use.

"As has been the case for five straight years, gift cards are expected to be the number one present this holiday season," Bankrate Managing Editor Ellen Cannon says. "Consumers need to be aware of the fine print on their gift cards to make sure they get the most out of their holiday gift."

Bankrate today released a study based on surveys of 29 gift-card issuers to determine fees involved and where buyers can get the most value. While many issuers have ended practices that previously drew consumer ire, such as expiration dates, there are still several policies to take note of when shopping:

• Maintenance fees: Check major credit-card issuers' fees on the shop-anywhere gift cards they offer; three of those surveyed charge a $2.50 monthly maintenance fee after a year of inactivity;
• Purchase fees: Bankrate found that all in-store purchases of store gift cards don't carry such a fee, but all credit issuer gift cards do, to the tune of $3.95 fee;
• "Valid thru" dates. While cards don't expire, they carry such a date reportedly due to the magnetic strip's shelf life. Pass that date, and the bearer will need to contact the issuing company to swap out for a new card;
• Online use: Most retailer cards allow the owner to use them for online purchases, but some major retailers such as CVS, T.J. Maxx and Marshall's do not;
• Credit-card reform's impact: The credit-card act that takes effect in February doesn't prohibit inactivity fees, but it does stipulate that gift cards can't expire in less than five years.

One other suggestion: If you're sending a gift-card in the mail, you many want to insure it for the face value of the card, in case it's lost or stolen in route to its recipient.