Call them the gifts that keep on taking.
Gift cards are increasingly popular, but some come with hidden fees that can make them seem Grinch-like.
The amped-up gift certificates – prepaid debit cards that let recipients pick out their own perfect holiday gifts – first hit the market in the mid-1990s and have grown rapidly ever since.
Time-strapped shoppers spent about $37 billion on gift cards last year, and projections call for sales to increase this year as much as 20 percent to $45 billion, according to Bain & Co.
Cards can be personalized to include the recipient’s name or be given a holiday-themed design or message like “Feliz Navidad.”
But not all cards are created equally.
Store-issued cards – typically redeemable only at that particular retailer – tend to carry either no fees or minimal fees.
But bank-issued cards, accepted at a wide range of retailers, tend toward a Byzantine fee structure that can include issuance and maintenance fees, as well as other charges.
“Consumers need to read the fine print,” said Karl Bjornson of Kurt Salmon Associates.
Some banks even promote cards as a way for merchants to pocket extra cash. On its Web site, Fifth Third Bank suggests designing a fee structure that “capitalizes on inactive cardholder accounts.”
Progress has been made on making the cards more consumer-friendly.
Last February, 18 retailers – including Bloomingdale’s, Circuit City, Sears and J.C. Penney – agreed to replace lost, stolen or damaged gift cards after New York Attorney General Eliot Spitzer examined their policies.
Kenny Thomas, a spokesman for Visa USA, whose member banks include some of the largest gift card issuers, said the best way to avoid fees is to use up the balance within six months, after which maintenance charges typically kick in.
Below is a list of the fees and restrictions applied to some cards:
* The Charter One gift card is billed as the first with no fees – meaning there are no up-front processing, shipping or handling charges.
Expiration: Six months
Hidden costs: A $10 monthly maintenance fee will be charged to accounts if a balance remains once the card expires.
* Bank of America-issued Visa gift cards.
Expiration: One year
Hidden costs: A $2.50 monthly maintenance fee kicks in after six months. The bank will reissue the card after expiration for $7.50 or refund the unused balance for a $15 check processing fee.
* Wal-Mart
Expiration: None
Hidden Costs: It will charge a $1 service fee to dormant accounts that haven’t been used for 24 months.
* Toys ‘R’ Us
Expiration: None
Hidden costs: It will deduct a $2 monthly fee for dormant accounts that haven’t been used in 24 months.
The giving fee
Prepaid debit cards take the pressure off mall-weary shoppers, but these high-tech gift certificates can come with hidden costs.
Some of the fine print:
* Charter One gift card: Deducts $10 monthly fee if balance unused in 6 months
* B of A Visa gift cards: $2.50 monthly fee after 6 months; extensions beyond 1 year cost $7.50
* Wal-Mart: $1 service fee if card unused for 2 years
* Toys R Us: $2 monthly fee if card unused for 2 years