Get the Most Out of Your Gift Cards

If someone gave you a $50 bill, you probably wouldn't just stick it in a drawer and forget it. But that's essentially what happens to billions of dollars worth of gift cards each year – people either lose or forget about them, or never use up their balances.

Here's how gift cards work. There are two basic types:

• Retail gift cards, used to buy goods or services at a single merchant or affiliated group of merchants.
• Network-branded gift cards, issued by a bank and carrying the logo of a payment card network (like Visa, MasterCard or American Express) and can be used at any location accepting cards from that network.

Account information is stored in the card's magnetic strip. If you're not sure of the remaining balance, ask the merchant to scan the card, call the toll-free number on the card or verify it on the card issuer's website provided. Some store-branded cards can be reloaded; and most can be replaced if lost or stolen – although you may have to provide proof of purchase and pay a replacement fee.

The 2009 Credit Card Accountability, Responsibility and Disclosure Act changed laws governing gift cards sold on or after August 22, 2010. It requires that:

• Money loaded on gift cards must not expire for at least five years from date of purchase or after funds were last reloaded.
• If the card expires but the underlying funds have not, you can request a free replacement card.
• Inactivity, account maintenance and service fees may not be charged until after 12 months of inactivity; after that, only one such fee may be deducted from the balance each month. (Fees for activation or lost/stolen card replacement are exempt.)
• Fees must be clearly disclosed on the card or its packaging.

Here are a few tips to get the most out of your gift cards:

• Use them quickly; the longer you wait, the more likely you are to forget or misplace them.
• Treat them like cash; and write down the account and toll-free numbers to report lost or stolen cards.
• Ask if the retailer will honor the card for online purchases, if that's your preferred shopping method.
• Be sure to use up the entire account balance, or ask if a cash refund is available. You may be able to use multiple cards for a single purchase – say you have several low-balance Starbucks cards.

If you don't care for a particular retailer, consider trading gift cards with friends. Or check out some of the websites that have sprung up where you can buy, sell or swap certain kinds of gift cards, such as CardHub (www.cardhub.com), Plastic Jungle (www.plasticjungle.com), and Swapagift.com (www.swapagift.com). Just make sure you understand any transaction or registration fees or commissions that may be charged.

A few additional safeguards:

• If you have a retail gift card and the company goes out of business, you may forfeit the balance.
• Be cautious when trading cards with strangers. For example, if using a third-party exchange site, ask about their verification policies and check with the Better Business Bureau (www.bbb.org) for complaints.
• Avoid unsolicited offers for free cards that sound too good to be true. By following spam links you could jeopardize your personal information.