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Four Things to Know About Gift Cards

Gift cards are quick, convenient and just about everywhere these days. But there’s a catch – some of them expire, some impose a service fee and some of them could useless if the store goes bankrupt.

There are four rules to remember when it comes to gift cards, said Joe Ridout of Consumer Action:

1. Gift cards expire. Many retailers and states charge dormancy or inactivity fees, which mean unused cards will die slow deaths if they are not used.

2. Beware of fees. Bank-issued gift cards are especially known for have purchasing fees of $5 or more, plus inactivity fees. States cannot prohibit these fees like they can for retail cards.

3. Lost card? Lost money. If you lose a gift card (and who hasn’t?) hopefully you have preserved the record of the card number, otherwise it will be difficult to get a replacement. Some retailers will issue a new card provided the lost one has not been used, but don’t count on it.

4. You aren’t stuck with the card you’ve got. Web sites like CardAvenue.com or SwapAGift.com let you sell your gift cards for 50-70% of their value. You can also always try and hawk an unwanted gift card on eBay or even regift it to a friend or relative.

The bottom line, according to Ridout, is that gift cards are essentially interest-free loans to retailers. Like all those toxic assets on the balance sheets of so many banks, they shouldn’t be assumed to be free money. It’s best to spend them sooner rather than later.