In 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act (a.k.a. CARD Act) into law. This law, which mostly deals with consumer protection from credit card companies, also includes new rules for gift cards. Gift card changes go into effect August 22, 2010 and all cards on the shelves must be in compliance by January 31, 2011. Here are the highlights of what you can expect:

Good for Five Years: Gift cards are prohibited from expiring within five years of activation (or when money was last loaded onto the card) unless the terms of expiration are clearly disclosed prior to purchase.

No Fees for One Year: Gift cards are exempt from dormancy, inactivity, or service fees unless the card has gone unused for a year and the non-use fee terms are clearly disclosed prior to purchase. Not more than one non-use fee can be imposed per calendar month.

Other Fees Allowed: Other fees such as activation or reload fees are only allowed if the fee amount (or explanation of how the fee will be determined) is clearly disclosed prior to purchase.

Bank Gift Cards Covered: Previous gift card laws did not pertain to bank issued gift cards such as Visa, MasterCard or American Express. Under the CARD Act, however, these gift card issuers must also comply with the new federal law.

Phone and Promotional Gift Cards Not Covered: Prepaid phone cards, re-loadable cards, loyalty cards, and paper gift certificates are not covered by the CARD Act.

What You Need to Know

For me, there are really only three things to remember:

1. Gift card fees and expiration must clearly be written on the gift card and must be disclosed before purchase. No surprises. If you can’t find this information on the card, don’t buy it. (To avoid the destruction of millions of plastic gift cards already printed, manufacturers have until January 31, 2011 to make sure their cards have the mandated information.)
2. While the CARD Act broadens consumer protection to include bank issued gift cards, it doesn’t apply to prepaid phone cards, promotional gift cards, or other store loyalty cards designed to encourage repeat shopping. For example, if a restaurant gives you a free $10 gift card with the purchase of a regular gift card, the free gift card might only be good for a certain period of time. That restriction is legal but should also be clearly disclosed prior to purchase. If you don’t see the terms marked on the promotional card, ask before taking advantage of the offer.
3. State laws, if more stringent, take precedence over federal. Check your state laws to learn more. In California, for example, store issued gift cards (not the bank ones like Visa and MasterCard), cannot expire. And if the balance on the gift card is less than $10, you can cash it out. My experience with this law is that cashiers often know the rule, but don’t always know how to complete the transaction on the cash register. Cashing out a gift card in California may not be an activity for the time-crunched shopper, but is still good to know!

Keep in Mind

The gift card protections offered by the CARD Act center mostly around maintaining the balance of unused gift cards. I don’t think we’d need this extra protection if we did a better job of:

• Using the gift cards we have.
• Picking out and giving the right gift cards.