The Ins and Outs of Gift Cards

Christmas gifts

The Ins and Outs of Gift Cards


Gift cards have become big business in the last 20 years and shoppers can find racks of cards at most grocery and drug stores. But not all gift cards are created equal. Whether you are sending Aunt Margaret a gift card this season or have received a card yourself, it’s important to know the difference in types of cards available. Canada changed its regulations on gift cards in 2007, applying rules that protect the both the purchaser and the recipient.

Terms and Conditions

It is important for the buyer and the recipient of any gift card to read and understand the terms and conditions of that card. The law states that this information must be stated clearly in writing for the consumer and is generally printed on the cardboard holder the gift card is affixed to.

Store Gift Cards

Gift cards that are branded for a particular retailer are referred to as “store gift cards”. These include cards branded for various chain restaurants, on-line retailers and gas stations and they are sold in predetermined denominations such as $20, $50 and $100. No HST can be charged for the value of the card when purchased. Cards such as these have no expiry date (one of the consumer protections provided in 2007) and the provider of the card cannot charge any fees for using the card (another such protection) except in very limited circumstances, such as customizing a card or replacing a lost or stolen card. Most of these cards can also be used for any on-line purchases the retailer offers. The information from the card is entered at the point of “check-out”, and the value of the purchase is automatically deducted from the balance of the value available on the card.

When you buy a store gift card, the activation of that card occurs when the card is scanned at the point of purchase and a special receipt is issued that provides activation information. If you are sending this card to someone as a gift, include this receipt as a safeguard, just in case there was an issue with the electronic activation.

What happens if a store goes out of business and you have a gift card for that store? Well, generally you’re out of luck. So it’s best to ‘strike while the iron’s hot’ as they say. Don’t carry a large balance on the card and keep a watchful eye on consumer news pieces that may hint at a closure. The Financial Consumer Agency of Canada recommends that consumers pay for gift cards with a credit card, which can sometimes help recover money lost if a business goes under.

Shopping Mall Gift Cards

Some large shopping malls issue gift cards that can be redeemed at any of the retailers within the mall itself. This practice encourages shopping within a specific physical location. These cards carry different consumer protections from store gift cards. First, mall gift cards are allowed to charge up to $1.50 to activate the card at the time of purchase. This is sometimes deducted from the value of the card and sometimes paid as a separate fee for buying the card. Like store cards, these are sold with pre-loaded value, but unlike store cards, it is often possible for the purchaser to load any amount of money onto this card. The Consumer Protection Act ensures mall gift cards to retain their full value for 15 months but after that period, the mall may apply fees up to a maximum of $2.50 a month for ‘dormant’ cards. These fees are deducted from the remaining value of the card and can quickly erode the card’s value. By rights, the cardholder may request a three month extension to the period before which dormancy fees are applied, but must do so in the 15th month.

Visa, MasterCard and American Express Gift Cards

Payment card gift cards are easy to use and are accepted anywhere the payment card brand can be used. These cards cannot be loaded with additional funds like prepaid credit cards and are purchased in assigned denominations. Such cards are generally, but not always activated electronically at the point of purchase like store cards, but some have to be activated by the recipient prior to using. Be sure to check activation instructions and send those along to the recipient as well.

These cards are permitted to expire but if there is a balance remaining, a new card may be requested for which there may be a charge. Also, some cards may be issued that are valid only in Canada. Be aware if that is the case. Once all the funds are used, the card can simply be discarded. A great way to use up the small remaining balances on payment cards is to purchase an email gift certificate from a favourite on-line retailer like Amazon. Simply buy email gift certificates for the same value as your remaining funds and it will be sent to you in your email.

Local Service Businesses

If you are buying a gift card from a small local business for a specific service such as hairstyling or a manicure, ask about expiry terms as these cards are not covered by the Consumer Protection Act’s provisions for gift cards.

Know Your Rights

All of these card types can be a great gift for someone but as with anything, it’s important to understand what you’re buying. If you have a complaint about a gift card or have been charged a fee you don’t believe is valid, you can use MyResolver to file a complaint with the issuer. It’s always easy and free to use.

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