Are Gift Cards an Asset or a Curse?

I was surprised when my niece in California recently texted to thank me for the ice cream cones she had just purchased with a gift card I gave her for her 14th birthday. My niece is now 28 years old, and I bought that gift card in Ohio which allows gift cards to expire after 2 years, but lucky for her, California law doesn't allow gift cards to expire.

Why Gift Cards Are a Risky Option

Gift cards are not well protected by the law, and therefore may not make the best gift to congratulate newlyweds or college grads.  Gift cards are also commonly stolen by scammers and thieves since the value is available to the holder of the card numbers.  Gift cards are generally worthless when the retailer files bankruptcy, and are almost never replaceable when lost or stolen. 

You would think that gift cards are protected by federal law, like credit cards and debit cards, since they are sold and used everywhere in the U.S.  But federal law is weaker than nearly all state laws that allegedly protect the gift card holder.  Federal law only requires gift cards to be valid for a five year period, and even worse, allows the value to dwindle when left unused for more than 12 months by permitting inactivity fees. For example, a $2 per month inactivity fee for a $25 gift card would make the card worthless if not used after 2 years. Federal law does require these terms to be disclosed on the card OR ITS PACKAGING, so once you throw away that outside cardboard cover, you’ll lose track of when it expires or loses value. Now there are a handful of states that prohibit expiration dates on gift cards, including Washington and California, but figuring out whether federal law or which state law applies to a specific retail gift card is a legal question most law grads would flunk on their state bar exam. A review of all the state laws for gift cards shows a wide variety of rules, from no expiration date to any expiration date, some requiring only disclosure, others woefully lacking in any protection.  Look on the back of any gift card, and it may say that the law where the company is incorporated applies, or the law where the card is redeemed, or the law where the card is purchased. A gift card in my wallet for Hobby Lobby says the law of Virginia applies, which allows any expiration date as long as the date is disclosed or a phone number is given to find out its value. 

Avoid Becoming a Victim to Gift Card Restrictions

All the gift card laws have exemptions and exceptions and other legalese that further complicates the question of whether the cardholder has any rights at all. There is generally no protection for gift cards given out as a rebate or anytime you don’t actually pay money for the card or given out by a non-profit for a fundraising scheme. For example, when Costco offers you a $50 gift card for purchasing a new iPad, the law probably doesn’t prohibit Costco from giving that card a short expiration date, even in Washington. 

So think twice before buying a gift card as a gift, and act fast when you receive one as a gift. If you have a wallet full of unused gift cards, they may or may not be an asset you must disclose in any legal proceeding like divorce or bankruptcy and may represent hidden money by an opposing party.  The value of unused cards may be calculated using web-based buy-back services. Clark Howard, a reliable consumer advocate, recently explained his experience with selling his gift cards to web buyers who typically buy unused gift cards at a 20 or 30% discount off face value. 

If you need help with mediation, divorce or a property dispute, our attorneys are ready. To understand your options, call our offices now at 425-460-0550 or contact us online to set up a consultation with a Seattle division of property lawyer.

Molly B. Kenny
Founder and Principal Divorce Attorney
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