There are only a precious few more shopping days until Christmas. If you are like me, it's tempting to skip the malls and the expensive postage by getting everyone on your list a gift card! While they seem like a safe and easy way to give money during the holidays, the Better Business Bureau recently had a few things to say about this popular holiday choice.
According to the BBB, billions of dollars will be spent on gift cards this holiday season and
pre-paid bank cards—or stored-value cards—are expected to be very popular. These pre-paid bank cards are like gift cards, but can be used anywhere
credit cards are accepted, allowing the recipient more flexibility in
where the money can be spent. But the BBB warns that pre-paid bank cards aren’t without their
downside.
"Cold hard cash is going to be on a lot of wish lists this year as
families find it increasingly difficult to balance holiday spending
with paying for essentials," said Steve Cox, BBB spokesperson. "Pre-paid bank cards can be a great way to give money, but givers and
receivers need to pay special attention to the terms and conditions,
which can include substantial fees and limitations."
Not only are pre-paid bank cards a popular holiday gift, they are
also a way for people with limited access to credit cards to manage
their money—including making it easier to purchase items online. The
terms and conditions on these products do vary, so BBB recommends
consumers pay special attention to the following details when giving,
or receiving, a pre-paid bank card:
'Tis The Season to See Fees
BBB recently researched a bank card offer and
discovered more than 27 different fees ranging from a little under a
dollar to almost $20. Fees were attached to contacting customer
service, loading more money onto the card, and inactivity. The card
even had weekly base fees of $1.95—which ads up to more than $100 a
year to use the card. BBB recommends paying close attention to all
terms and conditions associated with pre-paid bank cards and is
encouraging consumers to ensure they read the fine print and ask about
and understand any "hidden" fees.
What Happens if the Card is Lost or Stolen
Pre-paid
bank cards are often branded by major credit card companies, such as
MasterCard or Visa. While credit card companies promise zero or limited
liability to card holders if their credit card is stolen or lost, the
same protections do not necessarily apply to stored-value cards. Again,
BBB recommends paying close attention to the terms and conditions of
the card, which should outline the consumer protections allotted to the
holder.
Just Like a Credit Card?
In some cases, such as
renting a car or reserving a hotel room, a pre-paid bank card might not
be accepted. Consumers might also have a hard time using pre-paid cards
when paying a deposit for larger purchases.
Some card issuers, but not many, report to a credit bureau, which
means that holding a card can potentially have a positive impact on a
consumer’s credit score. Because a consumer cannot overdraw on the
card or risk not paying a bill on time, there’s no way for a consumer
to damage their credit by using a pre-paid bank card either.
For more information on giving and using gift cards, and on managing credit and debit cards this holiday season, go to www.bbb.org.
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