Cost Of Buying Visa Gift Card

Dear ABC News Fixer: A couple weeks ago I bought my son and daughter-in-law a Visa gift card for their anniversary. It was a $50 card and I paid a $4.95 purchase fee. On the card holder jacket there was a notice that read: \\\"No fees after purchase.\\\"

My son and daughter-in-law used the card at a restaurant. When they paid their bill, they were told that the card was only worth $42. The server told them that Visa gift cards take about 20 percent off the top but had no other explanation.

As for the missing $8, we were mystified, until we heard about \\\"tip tolerance.\\\" This apparently happens when consumers use credit card-branded gift cards at businesses where gratuities are expected, such as a restaurant or a salon.

Your son and daughter-in-law's dinner tab was about $160. We called Visa, and a spokesman said the restaurant should have been able to circumvent its normal processing system and just apply the full $50 gift card to the bill.

We've heard of other cases in which embarrassed diners had their credit card gift cards rejected because they were too close to the limit. In most cases, consumers can avoid this tip-tolerance rejection by telling the server ahead of time that they plan to tip in cash. For bigger transactions, it's worth noting that some merchants won't let you split a transaction between a gift card and a credit card. In that case, you'll have to charge the whole thing and use the gift card for something else.

Consumers should be wary at gas stations, too, since some pumps automatically pre-authorize $50 to $75, even if you're only planning to buy $25 in gas. Consumers with credit card-branded gift cards should go inside and have the cashier only authorize the exact amount they wish to pump.

Bottom line: Though they look like credit cards, these gift cards behave differently. To avoid an awkward situation, know your gift card balance and talk to an employee or manager before presenting it for payment.

The Credit Card Accountability Responsibility and Disclosure (Credit CARD) Act provides several protections for consumers who purchase certain types of gift cards, including store and restaurant (also known as merchant) gift cards. These cards can only be redeemed at the stores and restaurants that sell them. Bank gift cards, which carry the logo of a payment card network (e.g., Visa, MasterCard), are also subject to Credit CARD Act protections and can be used wherever the brand is accepted.

Under the law, a gift card cannot expire until at least five years from the date it was activated. The law also places general limitations on fees. For instance, the card issuer cannot charge a dormancy or inactivity fee on a gift card unless there has been no activity for one year and the card clearly states its policy toward that fee. In addition, some states have separate laws that provide added protection in certain circumstances.

Another common scam is someone who poses as an attorney for a family member and claims that the family member is in trouble with the law and needs assistance. They contact you by phone or email, and ask you to purchase gift cards in specific amounts to pay them. These are all red flags to a scam, and once you purchase the gift cards, the scammers will tell you to provide them with the code numbers and PINs that are usually located on the back of cards so that the scammer can redeem them.

By giving a gift certificate or a gift card, you make it possible for your friend to purchase the particular item or product that he or she wants. You may also want to purchase a gift card for yourself from a business that you patronize regularly.

This legal guide answers common questions about gift certificates and gift cards sold after January 1, 2004, with respect to California law. Since most of the answers also have exceptions, be sure to read the entire answer. Please be aware that the federal government has also recently enacted regulations on the topic of gift certificates and gift cards, effective August 22, 2010.1 Federal law may pre-empt California law where the terms are inconsistent and federal law is more protective of consumers. Because the federal regulation is so new, specific issues of pre-emption have not been decided by the Board of Governors of the Federal Reserve system, nor have they been litigated. It is the opinion of this office that, where the laws are inconsistent, the law that is most protective of consumers should be followed. For an overview and comparison of federal and California gift card law, please see Tables A and B, attached.

Q.1. Are a \"gift certificate\" and a \"gift card\" the same thing A. Yes. However, the terms exclude a gift card that can be used with multiple unaffiliated sellers of goods or services (for example, a card that can be used at all or some of the stores at a particular mall)6 provided the expiration date, if any, is printed on the card.7 Also, the rules described in this Legal Guide do not apply to prepaid calling cards issued solely to provide an access number and authorization code for prepaid calling services.8

A seller of unaffiliated, multiple seller cards without an expiration date -- many of which are sold by banks like pre-paid debit cards -- may take the position that such cards are not included in the definition of \"gift certificate,\" and therefore service fees or dormancy fees can be imposed without being disclosed. Buyers should beware when purchasing \"unaffiliated, multiple seller\" cards that not all questions about the terms of these cards have been answered and ask carefully about their terms before purchase.

Q.4. Can the holder of a gift certificate or gift card redeem it for cash A. This depends on the policy of the seller. The gift certificate law states that a seller must either redeem a gift certificate or gift card sold after January 1, 1997, for its cash value, or replace it with a new certificate or card at no cost.18 However, California's Legislative Counsel has concluded that a seller is not required to redeem a gift certificate in cash when requested by a consumer.19 Thus, some gift certificate sellers redeem the gift certificate for cash or a combination of merchandise and cash, while some issue a new certificate for any balance remaining after the original certificate is redeemed. A gift certificate or gift card without an expiration date is valid until it is redeemed or replaced.20 781b155fdc