With some gift cards, it's use it soon or lose it

[Hoss68]

Melissa Levy, Star Tribune
December 30, 2004

Gift cards have become an increasingly popular holiday present. But Scrooge can be lurking nearby, with expiration dates and service fees nibbling at the gift.

At least one local lawmaker wants Minnesota to join dozens of other states in trying to end that practice.

Major retailers such as Target, Best Buy and Marshall Field's don't have restrictions on gift cards, but bank-branded cards issued by Twin Cities area malls impose charges if the cards aren't used within a certain number of months. For example, the Simon Visa Giftcard, sold at the Mall of America and Maplewood Mall, deducts a monthly fee of $2.50 after six months of non-use. Similar fees kick in after a year with gift cards issued by malls including Burnsville Center to Southdale Center.

Sen. Wes Skoglund, DFL-Minneapolis, plans to introduce legislation next week that would ban expiration dates and service fees on gift cards.

He wants a $25 gift card to be worth $25, no matter when it is redeemed.

"People pay real money, total value, for these things," Skoglund said in an interview Wednesday. "Most people don't know that there's frequently an erosion factor in gift cards -- that they're worth less the longer you hold them."

More than $17 billion of gift cards were expected to be sold nationally this holiday season, according to the National Retail Federation.

The cards were expected to be the most popular choice among Twin Cities shoppers, topping standbys such as apparel, books and toys, according to a November survey by consulting firm Deloitte & Touche. The average Minnesotan planned to give about five gift cards this holiday season. And 22 percent of those polled admitted to still not having used as many as five gift cards from last year.

About half of all gift cards are redeemed in January, said Tara Weiner, national managing partner of Deloitte's consumer business industries practice. But nearly 30 percent of the cards from last year's holiday season still aren't fully redeemed, she said.

That can present an accounting challenge to retailers, because most don't count the revenue from gift cards until they are redeemed.

Market correction

More than two dozen states have enacted or considered gift-card legislation in 2004 alone, according to the National Conference of State Legislatures' Web site.

When the topic came up in Minnesota last year, Buzz Anderson, the president of the Minnesota Retailers Association, said he told lawmakers: "If you do nothing, this issue will resolve itself."

As the popularity of gift cards has grown, so has the aggressive marketing by retailers. One reason: Merchants know that customers tend to spend more than a gift card's face value during their shopping trip. And the cards build loyalty to a particular store.

Shiny gift cards now often come packaged in an attractive envelope and are adorned with a bevy of designs. Competition also has prompted chains to drop their gift card expiration dates and service fees, Anderson said. For example, Sears ended its two-year expiration date on gift cards last year.

"It's correcting itself in the market," so a gift card law is not needed, Anderson said.

Malls argue that they must charge fees for their gift cards because they can't absorb the costs of administering them like a traditional store. In return, customers get the convenience of a card issued by a bank that can be used at a wider variety of stores.

In the first year that Burnsville Center issued American Express-branded gift cards, there was "more positive response than negative," marketing director Lisa Foss said. She said some shoppers weren't pleased with the $2 fee to activate the card. The card -- good at the mall's 150 stores -- also has a $2.50 monthly charge starting with the 12th month of dormancy.

Simon Property Group, the Indianapolis-based operator of Mall of America and Maplewood Mall, sold 6 million gift cards nationwide last year in the first year of its program. The company said it fully discloses all fees and meets all legal requirements.

"Simon Property Group is not a retailer, and the Simon Visa Giftcard is not a retailer card," a spokeswoman said in a prepared statement issued Wednesday. "It is a Bank of America-issued Visa debit card, can be used anywhere that Visa debit cards are accepted and comes with built-in protections like those of other payment products, all of which carry fees and expiration dates."

[Hoss68]

5 local gift cards that charge you

December 30, 2004

Some local gift cards that charge you for not using them promptly:

Caribou Coffee

Mall of America

Maplewood Mall

Burnsville Center

Southdale Center

[JohnRN]

How about "Con Card" ?

[Hoss68]

What is that John?