Do Not Delay in Spending Those Gift Cards

After receiving a gift card, don't wait to use it. RYO Alexandre/Shutterstock

As we head into a new year, you may be settling in for a well-deserved rest from all the busyness of the holiday season. But not so fast. Before you haul all the boxes and torn-apart wrappings to the trash, take a quick inventory of the gift cards you and your family just received. The sad truth is that of the $308 billion Americans spent in gift card sales for Christmas 2024, about $27 billion of this amount will remain unredeemed! My guess is that many of them inadvertently will get thrown out with the trash. Funny how that happens. But I digress.

Now that you have all these gift cards, there are some things you need to know about them and how best to use them.

Do Not Delay

Someone could not decide what to get you, so they gave you the gift card. It is your responsibility to get out there and spend it.

Not Cash Equivalent

A gift card is not cash; it is store credit. It will not work the same as cash. For example, let’s say you zip right down to Best Electronics to redeem your $100 gift card. You buy the latest gizmo you’ve had your heart set on. It’s on sale for $79 with tax. So do you get $21 in change? No way. You will get your gift card back with $21 credit.

In no time you decide this is not really what you wanted after all, so with receipt and unopened box in hand, you attempt to make an exchange. You can’t believe that now they will only give you $59 in credit for this returned item because the store’s policy is to refund only the lowest sales price during the past 30 days when an item is purchased with store credit. Rip-off? Yes. But that is truly the policy in many stores.

And not to add more doom, but never forget that if the retailer for whom you are holding a gift card files for bankruptcy protection, the judge handling that case is likely to deem all outstanding gift cards null and void. How can they do that? Never forget you are holding store credit—not cash—and yes, they can do that.

Diminishing Value

It’s as clear as day that your gift card is worth $100. But when the clerk scans it, the store credit available is only $62. What?! How could that happen? Fees, my friend—those pesky fees. Here’s the deal: Many states still allow gift card issuers to charge dormancy, maintenance or inactivity fees, which can eat away at your balance.

The key factor is the state law where the card was purchased, not where you’re redeeming it. Even if it looks like a “new” card, it could be years old. And don’t forget that regifting trick. The card you got from Aunt Sue might have been given to her by Cousin Sam, who won it as a door prize at a Kiwanis Club meeting two years ago! Its value could be far less than the card’s face value.

Even worse, in some states, gift cards can completely expire.

In the United States, gift cards are generally protected by federal law, specifically the Credit Card Accountability Responsibility and Disclosure Act of 2009, which prohibits gift cards from expiring within five years of activation. However, states have additional rules that offer more protections for consumers. Here are some states where gift cards cannot expire:

California: Gift cards cannot expire, and fees are also regulated. The state has strong consumer protections for gift cards.

Connecticut: No expiration date can be set on gift cards, and fees are restricted.

Massachusetts: Gift cards cannot have expiration dates, and fees are limited to dormancy fees under certain conditions.

Michigan: Gift cards must remain valid for at least five years from the date of purchase, and they cannot expire sooner.

New York: Gift cards cannot have expiration dates, and fees can only be charged after 12 months of inactivity.

Washington: Gift cards cannot expire, and dormancy fees can only be applied if the card has been inactive for more than a year. States like Florida, Illinois and Virginia also have restrictions, typically limiting the imposition of fees and prohibiting expiration before a set time, but the rules vary based on the type of card and its specific terms.

It’s always a good idea to call the toll-free number on the back of the card to check its current value.

Usage Limitations

Some gift cards may not be used for purchases in a catalog or on the merchant’s website. Other limitations on gift cards include a prohibition against selling your card to another individual, or applying the value as a payment to a store credit-card account or redeeming the card for cash.

Remember, once you’ve used that gift card, let the giver know what you bought. It’s the least you can do and an easy way to say express your thanks.

Before you completely button up 2024, check out my Simple Steps for a Smoother 2025 using lessons learned from the holidays now past at EverydayCheapskate.com/2024Lessons.

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