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Gift Cards: Find Deals, Read The Fine Print

Gift card and bowNeed a quick last-minute gift? Want to give yourself a free present for doing it?

Consider a gift card to a restaurant.

Many popular chains are offering free bonus cards when you order gift cards between now and the end of the year, although some offer this deal all year long.

But that doesn’t mean gift cards always make great gifts.

Here are some of the restaurant deals we’ve found:

  • Ruby Tuesday is offering a free $15 gift certificate for every $50 in gift cards you buy.
  • When you buy $50 in Applebee’s digital gift cards online, you get a free $10 digital bonus card.
  • At Outback, you get a free $20 gift card when you order $100 in gift cards.
  • And at the Olive Garden, you get a $5 bonus card when you purchase $25 or more in gift cards. The cards can also be used at Red Lobster and other Darden restaurants.

It’s big business this holiday season, and it’s only getting bigger.

CEB TowerGroup estimates that $110 billion in gift cards will be sold in 2012, up 10% from last year and 34% since 2006.

But about 20% of gift cards are never redeemed, meaning the money was wasted.

Gift cards have other problems, too.

Many cards contain hidden fees and restrictions, which makes it all the more important to read the fine print.

Cards that can be used at any store are the ones most likely to charge fees.

According to BankRate.com, about 12% of gift cards it looked at that can be used at any store charged purchase fees ranging from $2.95 to $6.95. In addition, 75% of them charge as much as $3 a month after the first year if you don’t use them.

And unlike cash, some cards do expire eventually if you don’t use them.

The federal government has taken some steps to protect consumers. The 2009 Credit CARD Act mandates that gift cards cannot expire for at least five years, although retailers are still permitted to charge non-use fees after one year.

U.S. Sen. Richard Blumenthal, D-Conn., thinks these protections don’t go far enough.

He recently sponsored the Gift Card Consumer Protection Act that would completely ban gift cards with expiration dates and non-use fees.

The bill would also protect consumers from buying or being stuck with worthless gift cards if a company goes out of business. Companies that file for bankruptcy would be prohibited from selling gift cards and required to accept and honor unredeemed gift cards.

In 2008, Blumenthal said, Sharper Image required customers to spend double the amount on their unredeemed gift cards. It then stopped accepting gift cards for payment after it filed for bankruptcy.

Circuit City and Linens ’n Things allowed customers to buy gift cards from their stores after they filed for bankruptcy.

“Gift cards should not be the gift that keeps on taking,” Blumenthal said in a press release. “This measure assures that consumers get their money’s worth, no matter when they use the gift card.”

Blumenthal’s bill would also prevent loyalty, promotion and award cards from expiring.

Currently, most of these cards have very short expiration dates, often as short as 30 days. These cards would have the same protections as gift cards under Blumenthal’s proposed measure.

The federal Consumer Financial Protection Bureau also is considering new regulations for prepaid and gift cards.

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