Contacting the consumer advocate at your local newspaper or TV station can be a great way to get a company that is shirking its legal, moral, or ethical obligations to pay attention and do the right thing.  So I pay attention to those consumer advocates with great interest to see what publicly shamed company is doing an about face this week.

And this week it appears that gift card issues have gained the ire of the San Jose Mercury News’ Action Line advocate Dennis Rockstroh and he reports being contacted by hundreds of people reporting that many retailers still refuse to give them cash for gift card balances under ten dollars, more than two years after the law compelling retailers to refund such balances too affect.

The reason this continues to happen is that most people don’t put up a fight, thinking it isn’t enough money to be worth it.  But it is, because it keeps happening over and over to tens or hundreds of thousands of people, adding up to millions of dollars.

If this happens to you, I urge you to report the retailer to the California Department of Consumer Affairs, the Better Business Bureau, your local consumer advocate, and anyone else you can think of.

I’m not the kind of person who throws all my change in a jar and then looks to cash it in every five years, but if you are, you’ve undoubtedly come across one of the 17,000 Coinstar automated coin counting machines where you can simply dump your coins in and get cash, at a cost – Coinstar takes a 9.8% commission of the total.

But they have been offering some deals where you can get a gift card instead of cash and certain retailers have signed up to sponsor the waiving of the Coinstar commission if you get a gift card instead of cash.

They also periodically offer discounted gift cards.  For instance, Apple has done several promotions where you can buy a $50 iTunes gift card for $40.

Not a bad way to save a bit of money.

Prepaid card issues have been pushing non-gift prepaid card since the Federal Reserve finalized gift card rules for the Credit Card Act of 2009 and this recent news blurb (Wall Street Journal Overheard, 3/8/11) perfectly demonstrates the fee traps that exist more than ever in non-gift prepaid cards.  As a reminder, the Credit Card Act of 2009 gift card rules exempt non-gift prepaid cards from the rules on disclosure and fee limits.

Price is everything for Wal-Mart Stores’ customers. So users of its popular prepaid debit card, managed by Green Dot, may be surprised to hear they still run up $3-a-month fees for up to two months even when their balance hits zero.

Many simply never use the card again. But those who do may find these fees and a regular $3 reloading fee deducted. For somebody depositing $100, that adds up to a painful 9% hit.

While monthly maintenance fees are disclosed by Green Dot, the cardholder agreement doesn’t specify that such fees can push account balances into the red. The only place to learn that level of detail is in Green Dot’s SEC filings, notes analyst Thomas McCrohan of Janney Capital Markets. Everybody knows the importance of reading the small print before signing up for a new financial product. But trawling through the 10-Q?

That’s a new low for both puntive fees and lack of disclosure for a prepaid card.

Secondary Marketplace Cardpool is now offering gift cards that can be used on their site, to purchase gift cards.

That is, two levels in indirection to a recipient actually getting a gift.

From a economical standpoint, this makes sense.

If you wanted to give your gift recipient as much choice in what gift they actually got, you could buy them an open-loop gift card, like American Express or Visa, but those come saddled with fees (yes, even after the new federal gift card laws) and are hard to spend the last few bucks.  Worse.

Or, you could give them a Cardpool gift card where they could buy a gift card from a retailer of their choice, at a discount, and likely be able to spend it all.  Better.

But as a gift, it is a horrible idea.  If a gift card tells a recipient that you weren’t willing to take the time to actually pick a gift for them, a gift card gift card (should I trademark that term?) says you weren’t even willing to take the time to pick a retailer they might like.

It’s a toss up.

I usually stick to actual gifts, unless it is a teenager that is in to music, an I get them an iTunes gift card.

Burried in this article (Bloomberg Business Week, Google’s Search for a Digital Wallet) about a payment service Google is experimenting with in Portland is an interesting tidbit that might bode well for gift card customers.

The idea behind this is that cell phones could contain a near-field-communication (NFC) chip (and some Android phones already do) that could talk to merchants cash registers and would act like credit card.  However, these chips could also store other information, such as loyalty card, coupons, and yes, gift cards.

What would make this really interesting however is if gift cards were automatically used (or at least presented) when you went to pay at a merchant.  This system, enabled in such a way, would solve three problems gift card holders currently face

  1. Losing the card
  2. Remembering to carry the card when visiting the merchant
  3. Remembering to use the card when actually carrying it

Gift cards are frustrating in all three of these ways and I have many times been carrying a card and forgotten to use it when at the issuing merchant.

Whether this is a big win for consumers depends on whether it is implemented correctly, and it doesn’t seem out of the question that gift card issuers could resist this system functioning in this way.

Here is a great tip from Lifehacker on draining the last few dollars from your open-loop (Visa/Mastercard/Amex/Discover) gift card buy buying gift bucks.

The problem with Visa/AMEX gift cards is that it’s difficult to spend every cent. It usually takes several transactions to whittle away the majority of the gift card’s value. Once the remaining balance gets low enough, you forget to use it or have trouble finding suitable transactions that are cheap enough. Adding to the frustration, most retailers won’t accept two forms of payment for a single bill so these cards just collect dust in your wallet.

The best way to get your money’s worth (literally) is to convert your Visa/AMEX gift cards into dollars. Since they are just credit cards with a spending limit, you can use them to purchase Amazon gift cards. Amazon makes this very easy to do because you can purchase a gift card in any incremental value up to $5,000. In order to redeem the entire value you will need to purchase TWO Amazon gift cards. The first gift card should be the Visa/AMEX gift card value minus $1. Then purchase a second gift card for the remaining $1 balance. Amazon uses a $1 authorization to confirm the credit card, or gift card in this case, is legitimate. If you try to use the full value initially, it will get declined. If you have a $50 AMEX gift card, buy a $49 Amazon gift card followed by a $1 gift card. If you have a $14.56 AMEX gift card, buy a $13.56 Amazon gift card followed by a $1 gift card. It’s that simple.

Here is one indications that gift cards are winning the battle against consumer advocates that say they can be a bad deal.

That’s my niece’s Christmas wish list.  Gift card issuers seem to be doing a pretty good job of creating demand for their products.

I’m just glad she didn’t ask for any open loop cards. :)

The Wall Street Journal points out in an article today (Banks Pin Revenue Hopes on Prepaid Cards) why prepaid (non-gift) cards are a bad idea for consumers.

Prepaid cards carry the same interchange rates as debit cards, typically 0.75% to 1.25% of each transaction. So if banks lose some of the debit-card fees, they hope to regain them through increased prepaid-card use.

Because these cards are not covered by either the new gift card laws put out by the Federal Reserve, or the new laws regarding debit card fees, banks are free to charge what fees they want and apparently plan to make up lost revenue through these cards, which is sure to be a bad deal for consumers.

Insight into gift and prepaid cards comes from many places, and today’s information courtesy of a Wall Street Journal article on the prepaid debit card industry:

Yet customer and processing fees generate only about $11 a month in revenue per active card for NetSpend, estimates analyst Gil Luria of Wedbush Securities. And the average NetSpend customer uses their card for only 11 months before canceling. After servicing and distribution costs, including expenses for signing up new customers, NetSpend’s operating margin is 15%.

That average of $11 a month is a pretty hefty fee and far more than one would guess when buying one of these non-gift prepaid cards.  It is important to note that prepaid non-gift debit cards are not subject to the new gift card rules that came with the Credit Card Reform Act of 2009, and thus can charge greater fees earlier then their gift card bretheren.

It is also interesting to note, that at 15% operating margins, despite the hefty fees, the companies are not getting rich off of these cards.

One of the biggest problems with open-loop gift and prepaid cards is the ability to use them all up, or, in some cases, use them at all, as gift and prepaid open-loop cards can be very difficult to use online.  So, if course it catches our attention when there is mention of making  these cards easier to cash out.  Take for instance this recent press-release by MasterCard:

MasterCard Inc. is partnering up with Cardtronics Inc. in order to make free ATM access a possibility for prepaid card members across the country.

Quick Overview of Prepaid Cards

MasterCard prepaid cards are similar to gift cards and can be used as gift cards in that you purchase the card and then can contribute additional money to the card. Money can be added in-store at the time of purchase, online or via direct deposit from your paycheck. You can reload the card continually.

This card is basically an alternative to cash, without all the complications of maintaining an account or credit card. MasterCard offers different cards, including prepaid gift cards, travel cards and cards for everyday purchases.

MasterCard Differentiates From Other Prepaid Card Issuers

MasterCard has focused on growing its prepaid market and the latest addition to the strategy is expected to reel in more prepaid companies. Neil Dugan, MasterCard’s VP and head of U.S. markets prepaid product management told US Banker, “It’s a great opportunity for prepaid companies that are looking to differentiate, are looking for ways to provide value for their cardholders, looking to continue progress in the evolution of their products and the way they are going to market.”

MasterCard Partners with Allpoint Network

This decision also involved Cardtronics Inc.’s Allpoint Network, America’s largest surcharge-free ATM network with more than 37,000 ATMs across the nation. Although prepaid cards are a small portion of Allpoint Network’s business, the company is eager to increase that portion. “We’re trying to leverage our infrastructure as a financial kiosk leader to sell more products and services to this growing segment,” Allpoint president Ben Psillas told US Banker. Usually, Allpoint collects revenue from a monthly fee that banks and other customers pay based of of the number of cards that have access to the Allpoint ATMs. Card issuers who use the Allpoint Network through MasterCard will get a special deal on the price they pay. The terms of the deal were not specified.

It is important to make cash as accessible as possible for prepaid card users who are looking to replace actual cash with the cards. Making ATM usage free and accessible is a smart move on MasterCard’s part and could help build its customer base.

Sounds good right?  Well, sort of.  They don’t actually come out and say that you can get cash for your open-loop prepaid or gift card at an ATM, but they seem to vaguely imply this.  Interestingly enough, MasterCards FAQ makes in interesting statement about using prepaid and gift cards at an ATM:

Q: Can I use my Prepaid, Gift, and Credit cards at an ATM?
A: Yes. You may withdraw cash against the balance on most MasterCard prepaid and gift cards at any ATM. However, not all prepaid and gift card issuers allow ATM or foreign transactions. Be sure to check with your card issuer to ensure these types of transactions are permitted. Most Credit MasterCard® cards also allow you to obtain cash advances at an ATM. You will need a Personal Identification Number (PIN) to withdraw cash. To contact your card issuer, you will find their contact information on the back of your MasterCard card and/or on your billing statement. Or you can visit the issuer’s Web site to manage your account online.

The real truth lies in the fine print, which is that it is up to the individual issuing banks to decide whether or not you can simply cash out your gift card at an ATM.  As far as I know, most issuing banks DO NOT allow this or I suspect will make it hard to obtain a PIN.

Still, the fact that many more ATM’s will be available for these transactions if they are allowed is a step in the right direction.

Portland’s Giftango, which had previously scored a $1.4 million Series A financing round in 2009, got a fresh $5 million recently from a group of investors, let by Minnesota’s Taylor Corp, a company involved in gift card printing and fulfillment services.

Giftango helps retailers manage digital (including mobile) gift card and loyalty card programs.

With mail-in rebates, the odds are against you from the start.  My own experience is that I only get an actual response to a mail-in rebate about half the time, even if I have done everything right.  Then rebates started to appear as Visa/MasterCard cards, with none of the protections of most state laws or the new federal gift card laws.

It seems like they are becoming an even worse deal as rebate companies seem to be experimenting with shorter expiration dates.  Take this recent experience by a journalist:

Imagine my anger and humiliation when I pulled the card out in August, only to note two key dates: “Valid From 03/10” and “Good Thru 07/10.”

When he contacted the company that manages the rebate card program, he discovered:

A fact sheet on the site promoting rebate cards says this: “Checks expire within 3 or 4 months. While there are some exceptions, most rebate cards do not expire for at least 12 months.”

Clearly because of his experience, some rebate cards, and ALL rebate checks expire in substantially less than 12 months.  I think most people simply don’t pay attention to expiration dates and these companies must realize that shortening expiration dates is a good way to reduce redemption; it is better to deal with a few angry customers to save quite a bit of money.

We’ve previously posted some tips on getting the most value out of rebate cards, like:

  • Trick number one:  Take the card into your bank and attempt to have it turned into cash.  Apparently this is allowed on some cards.
  • Trick number two:  Use the card to buy another open-loop gift card, one that DOES have the gift card safeguards.

This particular customer decided to force the issue with the rebate company and demand a new card for his remaining balance:

I employed a strategy espoused by Richard Birke, director of Willamette University’s Center for Dispute Resolution. Everything is negotiable, he says. Plus, it never hurts to ask.

When I called the rebate card’s 800 number, I asked the rep to speak to a supervisor. None was there, she said, but she’d forward my request to one for review. Check back in 10 days on the status, she said.

Three calls and two weeks later, a rep named John told me my $85.80 had been reloaded on another card. I’d receive it in four weeks.

Electronic only gift cards still pose a higher risk to consumers due to the increased likelihood of losing or forgetting about them, but that doesn’t mean that carrying your gift cards around in an electronic form isn’t a good idea.

When we first reported on gift card apps earlier this year, gift card apps like the one from Wildcard Networks and Tango were interesting but supported few cards.  Since then they have continued to add supported cards but still very few compared to what is out there; about 25 for Wildcard and 60 for Tango.  Additionally, these apps are iPhone only.

I still think this kind of app holds promise if it ever gets gets widespread enough.  One promising sign is similar service called CardMobili that is for loyalty cards, for instance, for airline miles.  This service has apps for all major smart phones and supports hundreds of cards.  If something like this were available for gift cards, I would say it was a no brainer.

We’ll continue to monitor this space for improvements.

The Tango Card comes with a neat feature that automatically sends you periodic updates on the balance of your cards.

I’ve seen reports previously about telephone scams where thieves call people and tell them there is a problem with their bank account and they need to verify information.  People seem to trust that a phone call is legitimate and readily hand over personal information, including account numbers and passwords. The results of this of course are disastrous.

This scam seems to have migrated over to include gift cards as we’ve just seen a report of someone receiving a phone call claiming they won a Wal-Mart gift card and a credit card was necessary to complete the award.  They of course never received the gift card but instead were treated to a large charge on their credit card bill.

A simple rule holds true for avoiding scams, whether it is through email or by phone; don’t trust any information unless you initiated it.  If you receive an email asking you to click a link, don’t trust it.  The safest way is to go to the website directly by typing the URL into your browser.  If you receive a phone call asking you for information, unless you are familiar with the person, don’t trust them.  Find the number yourself, call the institution, and verify the information.

While this story has little relevance for gift card consumers, it is just too ridiculous to ignore.

Earlier this month, a man called a 24-hour Wal-Mart in Columbus, Ohio, at 1 AM and told an associate he was with Wal-Mart’s IT department. The caller instructed the associate to activate gift cards, read him those card numbers and then scratch off the tape on the back of the cards so she could tell him the authorization codes, police said. And the associate obliged. Hours—and more than $11,000 in online fraud—later, the store realized it had been had.

It must be hard for the non-techies of the world to keep up with all the latest tech terminology.

I just read an article entitled “New scam: Cloned gift cards, spyware that tracks reloading.”  What the thief did was to write a program that constantly accessed the merchant’s card balance checking website to check to see if the card had been activated.  He simply automated what most thieves practicing this type of gift  card theft do by hand.

Spyware, on the other hand, is a term used for software that is installed on an unsuspecting persons computer that monitors their activity, reporting such things as passwords for banking and other websites so thieves can drain the accounts.

But spyware could easily look for card balance checks and grab the gift card numbers, which thieves could use to clone the cards and spend the money.  And it would help the thieves avoid the potentially risky task of stealing the gift cards in the first place to capture the card numbers.

Just one more potential problem to watch out for.  If you fall victim to spyware, there is a lot more at stake than the balance of your gift card.  It is important to have internet and anti-virus security software on your computer and keep it up to date.

It is nice when someone takes a concept and creates a new way of understanding it, which is what has done with gift cards in their Mintlife blog.  We often buy gift cards because they are convenient and we aren’t aware of all the potential pitfalls, which have understandably gotten fewer over the last several years, but pitfalls do still exist.  Read this in full and see if you still want to buy a gift card for someone.

Read the rest of the story.

Technology often creates problems.  With the advent of gift cards and the electronic systems behind them, came the potential for problems and abuse.  We’ve seen plenty of examples of where technology has been used against retailers and consumers such as in the fraudulent cloning of gift cards and siphoning of their funds.  What you may not know is that there are also plenty of examples of when gift cards have stopped working properly, either through bad design or human error.

This story probably falls in that last category.

Last December, I paid cash to obtain $800 worth of American Express gift cards to give as Christmas presents. In March, my son tried to use his card. He was told that there was no money left.

He and I both placed calls to the customer service number on the back of the card. We were each told the money on the card had been sent to the Massachusetts Unclaimed Property division. The card said it was valid thru April 2014.

I contacted the Unclaimed Property, as suggested by American Express customer service. The first time, the Unclaimed Property division said nothing had shown up. I again tried to reach American Express, which said they could not add money back to the card without the receipt. I couldn’t get any answers about what happened.

This kind of thing happens all too often.  But what makes the difference between feeling taken advantage of and getting a problem successfully resolved is the persistence of the customer and the ultimate nature of the company involved.  I’ve seen lots of frustrating stories from people about American Express gift cards, but I’ve also seen some examples where the company has gone out of its way to right a wrong, when the customer was persistent enough to pursue a resolution when he was initially rebuffed.

You might find that the company that issued the gift card is quite reasonable and will fix the problem without too much fuss.  Or you might find that it takes some persistence to get your problem resolved.  What people don’t realize is that if no one complains about problems, companies have little reason to improve; it simply isn’t enough of a both.  I personally do my best to pursue any matter where I feel that I’ve been treated unfairly, even if it is for a few dollars and even if it is just writing a letter to a company to tell them why I will no longer be doing business with them.

Here are some tools you can use in increasing level of escalation:

  1. Call regular customer service
  2. Ask to speak to a customer service manager
  3. Search Google or Bing for executive level contact information for the company and write them letters
  4. File a Better Business Bureau complaint
  5. File a complaint with your state’s departement of consumer affairs
  6. Contact your local TV station or newspaper consumer advocate and ask them to contact the company on your behalf
  7. File a story at Consumerist so others will see your experience
  8. Share your experience on Twitter.  Many companies monitor Twitter and respond to complaints.
  9. For financial products, file a complaint with their state or federal regulator, such as the Federal Reserve.
  10. If you believe the company has behaved in a criminal manner, contact your state’s attorney general to file a complaint.  State Attorneys General will pursue investigations if enough people complain.

The point is, there are lots of ways you can pursue resolution beyond simply calling customer service.

Even better, search Google or Bing BEFORE you buy a particular gift card to see what other people are saying about the company.  Try searches like “company_name gift card sucks” or company_name gift card problems.”

Sometimes, none of these things work.  I had an open-loop gift card that showed no balance when it should have had $25 on it, as it had never been used and neither the website or customer service number provided a way to get in touch with a human.  None of the tools above worked.  But I felt good knowing I had tried to get resolution.

In the story above, here is what happened:

After presenting the situation to the folks at American Express, they dug in to figure out what happened — which apparently got a little confusing along the way — and then righted the wrong.

When you’re about to try to gird for a fight with a company, take the time to be sure of the facts and gather up all the documentation you can to help make your assertions as clear as possible.

First, in sorting things out, they found out that cards purchased in December were used. But the provided card number was indeed still valid and should have had money on it.

She said she couldn’t address what might have been said along the way in those customer service calls, but did explain the only reason there is an expiration date on the cards is so transactions can be processed.

“As funds on American Express Gift Cards never expire, we are sending her a replacement gift card with the remaining balance,’’ American Express spokeswoman Vanessa Capobianco said.

Ah yes, one more thing to remember, act reasonably and be nice to the people you talk to.  In the slim chance that you are wrong, that will help save-face considerably, and it might actually help you get resolution faster. offers discounted restaurant gift certificates.  A typical deal might be a $25 gift certificates for $10.  My wife and I have purchased discounted restaurant gift certificates from before and have not had problems.  But, according to a recent ABC News story, some people using these certificates are having problems, and it seems that many of them are related to misunderstandings, so it is important to understand how these work before you buy.

The first thing to be aware of is that gift certificates offered only in paper form are immune to the new Federal Reserve gift card rules, and thus can carry expiration dates and fees where gift cards are strictly limited. says that the restaurant gift certificates they issue do not have expiration dates, so this shouldn’t be a problem with but is just something to be aware of in general.

The gift certificates do have some restaurant specific limitations:

  • Restaurants may not accept gift certificates on weekends or may accept them for certain meals only (i.e. dinner only).
  • In some cases the gift certificates can’t be applied to alcohol purchases, tax, or tips.
  • Most restaurants have minimum purchase rules, meaning that you must often purchase a minimum amount when using the gift certificate. says that the average minimum amount is $35 but some do have a higher minimum amount.

None of these are show stoppers in my opinion but if you aren’t aware of them, you might be disappointed.

Specific terms for any individual restaurant are available both before and after you buy, so be sure and look for them.  One place you can find them is “specific restrictions” link, where you have to agree to the terms and conditions, during the checkout process.  The specific restrictions are also listed when you print out the gift certificate and on the certificate itself.

The ABC News article claims that if a restaurant goes out of business you are left holding a worthless piece of paper, but according to a spokesperson, they will replace your gift certificate with one from another restaurant of your choice if this happens. also clarified that in the particular case highlighted by the ABC News article, the restaurant changed the terms (refused to accept gift certificates on Friday nights) without informing them and that the customer did not try and follow up with  If they had, would have provided them with a replacement gift certificate for another restaurant.

These gift certificates can be a great deal, just be sure to be aware of any restrictions so your expectations are realistic.

I’ve sat back silently and watched all the hubub about Facebook gift cards over the last couple of weeks, waiting until I had enough information to form a good opinion.

If you haven’t heard, the big news is that Target will be selling Facebook gift cards.  I think the reason that this is so widely reported on has more to do with the fact that Facebook is a media darling and anything related to Facebook tends to get reported on.

When you buy someone a gift card, hopefully you are buying them something they can use.  If you happen to give someone a gift card that is really useful to them, such as giving a Home Depot or Lowe’s gift card to someone in the middle of a home improvement project, it can be as good as giving them a personalized gift; you obviously put though into the choice of gift card just as you might have put thought into the choice of a normal gift.

But above all, if the gift card isn’t useful, you might as well be giving rocks.  For instance, if someone gave me (a man) a lululemon gift card, that would be a pretty useless gift.

That is one reason I personally like gift cards so much; there is a 100% chance I would use it, and use it immediately.

So what about Facebook gift cards.  Facebook gift cards are for Facebook virtual currency and can only be used in games and applications hosted on Facebook, although there is a possibility that they might be used on non-Facebook games as companies like Zynga (the largest Facebook game developer) become more integrated with Facebook credits.  Facebook has 500 million users, so Facebook gift cards are a good choice, right?

Not so fast.  According to this report, one in five Americans has played a game on Facebook.  Notice the important distinction between “plays games’ and “has played a game”.  This means that the percentage of people that are active Facebook gamers could be substantially less.  Let’s say that 1/2 of those that have played a game are active Facebook gamers.  That means that if you randomly gave a Facebook gift card to someone, you have a 10% chance of them finding it useful.  Clearly, this is not the general purpose gift card to give just anyone.

But, if you happen to be on Facebook, figuring out which of your friends is an active gamer is pretty easy as Facebook games so often produce those annoying update messages.

The point is, when giving a gift card, think about your choice of gift card as you would your choice of any other gift.  Think about getting the person something they will use and appreciate.  If they are an active Facebook gamer, by all means, get them a Facebook credits gift card.  If they love music, own an iPod, and frequently use iTunes, get them an iTunes gift card.

Thoughtful gifts are always more appreciated than thoughtless ones.