As you start to work out your holiday spending budget, here's a bit of good news: Gift cards are a better option than they used to be.
A law that took effect this summer goes a long way toward making sure the value of the gift card you give or receive won't be eaten up by fees — whether it's a store gift card or gift cards with the MasterCard, Visa, American Express or Discover brand logo.
The Credit CARD Act of 2009 prohibits charging fees on a gift card, gift certificate, store gift card or general-use prepaid card unless the card has not been used for at least one year.
Even then, only one fee may be charged per month, and the consumer must be given clear and conspicuous disclosures about the fees. But there are no restrictions on the amount of that fee that can be charged after a year.
Those fees include dormancy and inactivity fees, monthly maintenance or service fees, balance inquiry fees, and transaction-based fees such as reload fees and ATM fees.
But read the disclosures on the card carefully before you buy, because you can still be charged a fee to purchase the card and other fees as well — such as a fee to replace a lost or stolen card.
The cards also must remain valid at least five years after they are issued or funds are last loaded onto them.
The law doesn't apply to certain types of cards, such as phone cards; loyalty or promotional gift cards; and cards that are reloadable and not marketed or labeled as a gift card or certificate.
It also doesn't apply to gift certificates issued in paper form only — such as the military commissary system's current gift vouchers. But these vouchers already have expiration dates of five years from the date of purchase and do not charge any fees.
Commissary officials have been working on a new permanent gift card program that should be in place by January, Defense Commissary Agency spokesman Kevin Robinson says.
The new law has no effect on the terms of gift cards sold in military exchanges because the exchange gift cards don't charge fees, except for the Army and Air Force Exchange Service and Marine Corps Exchange gift cards, which charge $2 per month when a card has been inactive for 24 consecutive months. The $2 is deducted each month until the card is used again or depleted.
All the exchanges accept one another's gift cards, except for the Coast Guard exchanges. That service just launched its own gift card program last year and is not accepting other exchanges' gift cards at this point.
The fees on gift cards at some retailers outside the gate have been onerous — in some cases, they started charging after six months of nonuse at rates greater than $2 a month. Some gift card retailers charged monthly fees.
If you've bought a gift card that does have fees and/or a shorter expiration date, the new law still applies, even though some cards printed before April 1 might display these old terms. Retailers no longer will be allowed to sell cards printed with the old terms after January.
Michelle Jun, staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports magazine, says federal law does not prevent states from enacting stronger protections for consumers, so some states may not allow any fees.
Jun notes that there is always a possibility of a retailer going bankrupt, and at this point, there is no requirement for a retailer in such a situation to set aside funds to honor those gift cards that were already sold.
If you receive a gift card, Jun advises, "use it fast and use it all."
Gift card program gets delayed
Registration has been delayed for the Sears Heroes at Home Registry, which provides military families with Sears gift cards for the holidays. When the registry opens, up to 23,000 participants can register on a fist-come, first-served basis at www.sears.com/ heroesathome. The registry is funded by donations from the general public.
Bang-for-the-buck tech toys
More good news for savvy Christmas shoppers: This year's hot holiday toys are high-tech — and low-price.
From tiny remote-control cars from Mattel to nearly paper-thin electronic guitars and drums from WowWee Toys, many techie toys are wallet-friendly at under $30. Some of the best, according to the experts at Time to Play Magazine:
• Paper Jamz, thin, $24.99 electronic instruments that offer three modes of play, including freestyle.
• Loopz game for $29.99 that uses motion detection technology as the basis for memory games.
• Air Hogs Moto Frenzy, $24.99 4-inch remote-control motocross racing bikes.
• Hasbro Inc.'s Scrabble Flash, a $29.99 electronic game with five cubes with digital screens on them that click together to form words.
• Hot Wheels remote control Stealth Rides, $24.99 remote control cars that are about the size of a deck of cards.