Consumer Reports: All you need to know about gift cards

November 25, 2011 8:25:37 PM PST
It's tempting to give gifts cards. In fact a just-released Consumer Reports' poll finds it will be one of the most popular gifts this year.

But the poll also finds a quarter of us still have unused cards left over from last year.

Here's what you need to know if you plan to give a gift card.

Sure, buying a gift card might seem like the "perfect" present.

Consumer Reports' Money Adviser says it's important to think twice before giving a gift card.

"Gift cards are definitely better than they used to be. New regulations have eliminated some fees, so you can't be charged if you don't use it within the first year. And cards can't expire for five years," said Mandy Walker.

But even with new protections, there are still drawbacks.

"The new rules apply to merchant and bank-issued cards. So if you have a reloadable card or one that's not marketed as a gift card, you're going to want to pay close attention to those terms," adds Walker.

Bank-issued cards are convenient because you can use them almost anywhere, but they come with fees. This Visa Gift Card from U.S. Bank costs $3.95 if you get it from a branch or $6.95 if you buy it online. And after 12 months you're charged a $2.50 a month inactivity fee if you don't use it.

Even charity gift cards come with fees.

"We found one that charged a 4.95 transaction fee and it charged another three percent to transfer the funds," adds Walker.

But if a gift card is still the way you want to go, retail store cards usually have little or no fees. You just want to make sure the person you are buying for likes to shop in the store.

"When you're giving a gift card, you want to include the terms and the policies, as well as the receipt, which might be needed if the card is lost or stolen," adds Walker.

But better yet, why not give cash or a check? That way people can shop wherever they want, whenever they want, no strings attached.