After a couple of years when consumers were skittish about buying gift cards for fear that a retailer might go out of business or because they found better deals on heavily discounted merchandise, plastic is in favor again.
Gift cards are the most requested gift for the third year in a row on surveys from the National Retail Federation, and shoppers say they plan to buy more of them this year. Gift cards also should be more consumer-friendly this year, thanks to the federal CARD Act, which placed tighter restrictions on issuers in August.
The CARD Act requires that gift cards be good for at least five years from the date of issue or from the last date that money was added to the card. It also limits fees for retailers and restaurants. Dormancy, inactivity and service fees are allowed only if the card hasn't been used for more than a year and are limited to one per month.
Banks must follow the same rules as retailers on inactivity fees, but they still may charge fees for activation, cash-out, supplements and replacements.
Many -- probably most -- retailers already were in compliance with these rules, so shoppers aren't likely to see any difference in the terms of cards they buy from their favorite department, discount or specialty store.
"Kohl's gift cards have no service fees and no expiration dates," said Vicki Shamion, senior vice president for public relations. "Kohl's did not need to make any changes to its Kohl's gift card terms as a result of the August legislation, as the cards were already in full compliance of the new law."
The same is true for Bon-Ton Stores Inc., operator of the Boston Store, Younkers, Elder-Beerman and Herberger's in Wisconsin.
"Our gift cards never had expiration dates on them, so we were ahead of the curve on that aspect," said Mary Kerr, vice president of investor and public relations for Bon-Ton.
Craig Shearman, vice president for governmental affairs at the NRF, a Washington D.C.-based retail trade group, said the CARD Act is having little effect on retailers, because most no longer have expiration dates on gift cards.
"Retailer-issued cards have long been the better choice," Shearman said.
Consumers are expected to spend $24.78 billion on gift cards this year, up from $23.63 billion last year but still well below the 2007 level of $26.25 billion. The average outlay for gift cards is projected at $145.61, based on a survey in November by BIGresearch for the NRF.
Despite the flexibility of bank-issued gift cards, department store cards are the top choice for consumers this year, with 39 percent of shoppers who buy gift cards planning to choose them. Restaurant gift cards are a close second choice, with 33 percent buying them. Bookstore gift cards are neck-and-neck with financial service firm cards for third place.
Consumer Reports magazine's poll offered another alternative on its wish list that trumped everything else: cash. Plain old money, which has no fees or expiration dates, is the most-wanted item, the magazine said, with gift cards and electronics ranking high as well.