New credit card law protects gift card holders

The new credit card laws enacted last month will not only protect credit card holders, but also the millions of unsuspecting gift card carriers who unwittingly lost money monthly under old laws.

As of Aug. 22, gift cards, including bank-issued Visa, Mastercard, American Express and Discover cards that can be used anywhere like regular credit cards, will not expire until they've been active for at least five years. The activation date is either when the card is purchased or, if it's a rechargeable card, when money was last loaded onto it.

Even strong state laws that protected consumers from dwindling gift card balances couldn't save people from the bank-issued cards, which where exempted from state laws.
Furthermore, the new credit card legislation limits inactivity fees on gift cards.

Before the new act, gift card issuers were able to charge significant monthly fees, whittling away at the amount of money the person could use on what was essentially a pre-paid credit card. Sometimes fees were even charged weekly or daily until the full balance was eaten away entirely.

While card issuers can still charge dormancy fees (or inactivity fees), the gift card now has to have gone unused for at least one full year, before the issuer can begin charging fees.
The new credit card act states that fees cannot be charged more than once a month, though there are now extremely few reasons issuers would be allowed to charge fees at all.

Some issuers used to disallow the use of funds on a rechargeable card once the balance falls below a certain limit, often $5. Under the new credit card legislation, that is no longer allowed. Consumers must be permitted to use their gift cards and will be able to apply the balances toward their totals and pay the remainder with a different method.

-Amanda H. Miller