Some Cards Are the Gifts That Keep on Taking

The burgeoning gift card industry has become freckled with all sorts of fees. There are fees to "activate" some cards, as well as fees to maintain them. Some cards even impose so-called dormancy fees if you don't spend the money soon enough.

Some cards are fee-free. But with no industry standard and inconsistent disclosures by card issuers, some hapless consumers can have the value of their gift cards eaten up by charges before they ever get to the mall.

"When you get those prepaid cards, use them to the hilt right away," advises David Robertson, publisher of the Nilson Report, a Carpinteria, Calif.-based newsletter covering the credit and debit card industries.

"The longer you hold the card, the more likely that you are not going to get the full purchasing power," he said.

Unfortunately, many people don't spend the cards right away. About 26% of the individuals who received gift cards at this time last year still have one or more unused cards in their possession, according to a random telephone survey of 1,000 adults conducted on behalf of Cardavenue, a gift card trading post on the Internet.

Over the last several months, national banking regulators and the California attorney general's office have issued consumer alerts about the cards. Their main message: Gift cards aren't all alike, so be sure to read the fine print before you buy -- or before you use them.

There are two basic types of cards: single- and multi-retailer cards. Single-retailer cards are issued by companies such as Target, Macy's and Borders and are aimed at getting people into a particular store.

Multi-retailer cards, as the name implies, can be used at many different stores. These cards are sold under the Visa, MasterCard, American Express and Discover brand names, among others.

Because retailers don't want to alienate customers, single-retailer cards generally have fewer fees than multi-retailer cards.

On the other hand, single-retailer cards are much like cash: If they're lost, they can't be replaced. And although they may not have as many fees as multi-retailer cards, some single-retailer cards do impose inactivity or dormancy fees, which strike after a card has been left unspent for a set time frame, usually 12 to 24 months.