Beware the Fine Print on Your Credit Card-Issued Gift Cards

By George Stargell, Senior Editor   

Now that the holidays are over, you may be looking forward to a shopping splurge with all those gift cards you received instead of socks, ties, scarves, and that flat-panel, high-definition TV you were secretly hoping for. While the gift-card giver's intentions were no doubt honorable, you still might want to spend a little time investigating the terms and conditions of the gift cards you received. Otherwise, you could be in for a surprise.

For instance, some retailer gift cards impose time restrictions on your gift-card usage. If you don't use your gift card within the specified timeframe, it can start losing value, sometimes as much as $2.50 a month. (Be sure to check with the individual retailer for any further terms and conditions.)

The bigger surprise for gift-card users, however, may come when trying to make purchases with gift cards issued in the name of credit card companies, e.g., Visa, MasterCard, and American Express gift cards. The terms and conditions applied to these gift cards can make your experience at the check-out register much longer and more frustrating than the gift-giver intended.

Common credit card-based gift-card limitations

Here are just a few of the terms and conditions often attached to gift cards provided through credit card companies:

• Limitations on "tip-oriented" purchases. Some merchants, including restaurants, hair salons, spas, and those in other service-related industries, automatically impose "gratuity" charges of up to 20% of your purchase. If your gift-card balance isn't high enough to cover the cost of the tip on top of the cost of the meal, haircut, or other service, the gift card can and will be declined.
• "Split-tender" transaction restrictions. Let's say you want to buy a $100 sweater, but you only have $75 remaining on your gift card. You ask the merchant to apply the $75 gift-card balance to your purchase and then charge your credit card the remaining $25 for the cost of the sweater. If you're lucky, the merchant will agree to do so, but most merchants only accept split-tender payments if you pay for the rest of the charge ($25, in this example) by cash or check — even if you want to use a credit card from the same company that issued the gift card.
  
  Split-tender purchases are an even bigger problem for online or mail-order purchases. It's virtually impossible to make split-tender purchases online, and most catalogue vendors refuse to accept them as well.
• Monthly service fees. If you don't use the gift card within the first 12 months of its purchase, it can start to decline in value by $2.00 (or more) each month.
• Other limitations. Generally speaking, credit card-issued gift cards can't be used at casinos, cruise lines, ATMs or to pay off utility bills, cellphone charges, or other revolving-credit bills.

For complete terms and conditions of gift cards provided through credit card companies, be sure to check out the specific credit card issuer's website.

There is one easy way to avoid gift-card hassles like these: Ask for gifts of cash, which, as it says on U.S. notes of every denomination, is still "legal tender for all debts, public and private."