Gift cards, as opposed to gift certificates, are plastic cards issued by retailers with cash “charged” on the card. Once the cash is used up, you recycle the card; in most cases, the excess value of the card cannot be redeemed for cash unlike the balance of an unused gift certificate (see below for more details). According to American Express, the 2nd most popular gift during the holidays is gift cards (right after clothing) but the value of unused gift cards in 2006 was $8 billion! Depending on what statistic you read, up to 1/3 of all gift cards go unused- most people simply forget about them. This is money in retailers’ pockets!
Once you get past our collective forgetfulness, the system of how retailers also issue gift cards works against the consumer. Some gift cards have expiry dates (sometimes quite short) and some gift cards have terms and conditions attached to them above and beyond the expiry date (the afore-mentioned restriction you cannot cash out the card, the card can only be used to purchase certain items and you cannot use the gift card to buy another gift card comes to mind).
The point being know the terms and conditions of a gift card before you purchase one for your loved ones- you could be buying a lot of headaches for them if you buy a gift card from a non-consumer friendly retailer. Above and beyond that, know the law. Here is a non-exhaustive list of consumer protection legislation that highlights some rules and regulation as it relates to gift cards (please refer to your applicable government for full regulations; ask for the department that regulates the Consumer Protection Act):
1. Ontario
Any gift card purchased after Nov. 1, 2007 falls under the new law which states in part:
- no expiry dates allowed
- no fees, such as inactivity fees, can be charged. The dollar value purchased is the dollar value to be redeemed (the only logical conclusion to this law is that clearly retailers were charged service fees)
- terms and conditions of the gift card must be given to the purchaser at the time of purchaser (do yourself a favor and ask for them before you before; don’t rely on the sales clerk to tell you verbally)
- Mall cards (i.e. gift cards you can use at any store in a mall) are exempt for now
- law does not apply to gift cards some specific services such as spas, massages and restaurants
2. Manitoba
Basically the same rules as Ontario (also effective Nov. 1, 2007) with some notable changes
- inactivity fee can be charged for Mall cards if not used within one year from the date of issue
- retailers are subject to additional disclosure obligations on how the holder may obtain information on cards
3. British Columbia
Not law yet but proposed legislation is similar to Ontario and Manitoba in that expiry dates would be prohibited from gift cards, a prohibition on fees for administrative charges and an entitlement to a refund equal to the difference between the balance on the gift card and the good/service purchased: this is a significantly broader proposed measure than both Ontario and Manitoba which still does not entitle the holder a right to cash on the balance remaining.
The proposal is not law yet. Sorry to all those B.C. shoppers; no protection this holiday season.
4. Alberta
There is a proposal plan to regulate gift cards under a unrelated piece of legislation. Mainly, it appears a holder of a gift card could redeem the cash balance on the card if not used. The emphasis is on “appears” since the legislation was drafted broadly and may need some more work.
5. Nova Scotia
A law was proposed in January 2007 to ban expiry dates on gift cards but it appears this has not moved one way or another since the introduction of the law.
6. United States of America
As usual, the U.S. has enacted consumer protection laws sooner than Canada (as a side-note, the Canadian provinces, which regulate consumer protection, are always behind their American counterparts in looking out for our best interests). The following is a good overview of gift card protection laws in the U.S.
The key with gift cards is KNOW YOUR RIGHTS before you buy.
December 18th, 2007 at 2:32 pm
Why buy gift cards at all? There is a social stigma to giving money as presents, and I personally don’t feel comfortable just giving a cheque or cash, but I have in the past given a catalogue from a retailer, a cheque for $X made out direct to the recipient, and a note saying “I think you’d enjoy something from this catalogue, since (reason). Gift certificates and gift cards are a pain in the neck to use and limit your flexibility, so please accept the attached cheque made out directly to you in lieu of one. I hope you’ll find something in this catalog you’ll enjoy applying the money to, but if there is something else you’d prefer, go for it!”
December 18th, 2007 at 5:20 pm
Houska- thanks for the tip. I had never thought of that suggestion.
You raise a completely different topic though- in some cultures giving cash is acceptable and, in fact, the norm. We live in a hodge-podge society of different cultural practices as it relates to money that a gift card may be, for some, a happy medium between giving cash and buying a present.
Have a great holiday!
December 18th, 2007 at 6:14 pm
I sell gift certificates for massages. They have always bore a minimum of 12 months for redemption. Usually if sold from October on they would be issued to expire the following year january 31; e.g. October 4 2004 expired on January 31 of 2006. If someone calls in near the end of the redemtion period to request an extra month or two, I have always honoured the request. Most reccently a woman called in and became irrate that her 2 year expired gift certificate (sold 3 years prior) would be honoured at the cost it was sold for. At the time of purchase it was sold for 35.00 and now the service is 45.00. Am I being unreasonable by offering to honour a 2 year expired gift-certificate at its purchase price?
December 19th, 2007 at 12:14 pm
i recently purchased a gift certificate at a nail/facial salon. the lady charged me tax. i told asked her why she was charging me tax when the tax would be charged upon redemption. she said it was a goods and services tax. stupidly, i just paid and left. is her business exempt from the new ontario gift card laws? also, how can i report her if she didn’t follow regulations? thanks
December 19th, 2007 at 12:46 pm
Heather- if you sold the gift card prior to Nov. 1, 2007, then you are legally allowed to state an expiry date on said card. As a business owner, its your call to honor a gift card expired for a year. Having said that, if she appears to be a one-off client shopping on price, it may not make prudent business sense to bend over backwards for her. Just my 2 cents but your call.
JJ- GST is not charged on gift cards at time of purchase. The tax issues is completely separate than whether her industry is exempt from charging GST. I would take the receipt back to the salon and ask for the GST back or to add the amount of the GST to the gift card. If they refuse then you may want to call CRA. Good luck.
November 23rd, 2009 at 5:02 am
[...] I also noticed that my Avion points can be redeemed for a gift cards to a wide variety of retailers. While the conversion rate is not great (for example, 3,000 points for a $25 Starbucks gift card), it can also be another way to buy presents for people, either giving the gift-card directly or using it to buy a variety of presents from the store that issues the gift card, without cash out of pocket. Just remember your legal rights concerning gift cards. [...]
November 23rd, 2009 at 1:02 pm
Could you update this article with more recent information? I know at least Alberta has introduced some legislation with respect to gift cards and this article has much more detailed gift card information than sources such as the news.
November 23rd, 2009 at 7:34 pm
Cam- I am going to be doing a legal rights and holiday post. I will update the gift card and the gym membership posts I have posted on in the past. Thanks for the tip and the comments.