When gift cards turned plastic, they seemed like the perfect present – convenient, easy to keep track of, and flexible for the recipient. But some gift cards – especially those issued by credit card companies – have been charging fees for card value unused after a certain point.

American Express: No More Dormancy Fees

Whether or not the move is part of a reaction to government attacks of credit and debit card fees is not clear, but American Express has announced that it will no longer charge monthly fees for gift cards that go unused.

On its website, AmEx announces that the elimination of monthly fees began September 30 and applies to all gift cards – those in stores, online and already in people’s wallets. Taken alone, this is good news. But American Express’s move may not cause others in the industry to follow.

• Visa cards are more widely accepted among retailers, which means that they may not feel motivated to adopt a similar no-dormancy fee policy.
• Chase cards come with a monthly fee of $2.50 beginning a year after the card is issued. The company hasn’t made any announcements about fee changes.
• American Express cards still cost between $2.95 and $6.95 to purchase and activate.

Credit Card Reforms and Gift Cards

The recently passed Credit CARD Act, which will bring various credit card reforms early next year, also has some provisions that will regulate gift cards. These include:

• Dormancy fee limits: Inactivity for at least one year is required before card issuers can charge dormancy fees to a card.
• Fees on packaging: Issuers must “clearly and conspicuously” identify all activation and other fees on the packaging of the card.
• Bans on early expiration dates: Gift cards will be prevented from expiring within five years of their issue.

Take Home Lesson: Proceed with Caution

If you’re interested in giving gift cards to your loved ones, consider getting store-specific cards, which generally don’t have activation fees or dormancy fees. Further, you can rest assured knowing it will be accepted at the outlet you have in mind.

Additional Resources

Notice on Prepaid Cards in the Credit CARD Act of 2009 (PDF)