Jake and Kendal Martin, ages 8 and 10, of Edmond, Okla., were thrilled by their Uncle Jack's birthday present: $25 Visa gift cards they could use to buy merchandise wherever Visa cards are accepted. Nearly a year later, as the cards were to expire, the kids went shopping. The experience was “somewhat traumatic,” their mother, Kacy Beamish, recalled: At the register, they discovered that their cards had lost $15 of their value.

Beamish learned that the Bank of America, which issued the cards, levies a $2.50 monthly “maintenance fee” after six months. The bank made good on the kids' cards, but only after Beamish complained to the Better Business Bureau. Along with the refund, she told us, she received a letter from the bank saying that she should have read the fine print.

Americans are giving and getting more and more of these plastic gift certificates. Gift-card sales could break $45 billion this year, up at least 15 percent from 2002, according to Bain & Company, a Boston consulting firm. Banks issue Visa or MasterCard gift cards at branches and online, and Visa-brand “mall” cards are sold at most of the 175 malls in 36 states that are owned by the Simon Property Group. In addition, stores from Starbucks and Barnes & Noble to Home Depot, Circuit City, and Wal-Mart sell their own gift cards.

Retailers say gift cards are easier and less expensive to handle than paper certificates, and harder to counterfeit. Consumers find them convenient, too--a magnetic strip tracks the balance, allowing shoppers to use the same card on several occasions. Some cards can be “reloaded” with more cash.


What you can do

Pay attention to gift-card ground rules if you intend to give a card this season, or if you've received one. Details about fees and such are usually on the card itself, on an accompanying sleeve, or on the store's or bank's Web site. Keep the receipt you get when you order the card, and write down the card's ID number.

Above all, make sure the card is used. Consumers never redeem about 10 percent of the money on gift cards, says Anthony Andreoli, national director of unclaimed property practice at Deloitte. For cards sold this year, that adds up to a potential $4 billion windfall to be reaped by retailers and banks. Other tips:

Know the types. Visa and MasterCard gift cards can be used anywhere those credit cards are accepted, even abroad; some include a PIN for use at cash machines. Store cards, on the other hand, must be used at the chain that issued them, though sometimes they're accepted at sibling chains.

Consider fees. Store gift cards are usually issued free; Visa and MasterCard varieties from banks cost several dollars. Whatever the issuer, there may be a fee for checking your balance. There may also be monthly “inactivity,” “maintenance,” “administrative,” or “service” fees--ostensibly for record-keeping--that kick in after a specified period. The Mall of America Visa card, for instance, deducts $2.50 per month starting seven months after the card's purchase; Wal-Mart's card deducts $1 per month “after 24 months of non-use.” Target's card, however, has no inactivity fees and never expires.

A California law taking effect in January bans service fees except when the card is unused for two years and has $5 or less remaining on it. But that's true only in California and only on cards from retailers, not from bank-based Visa or MasterCard, whose fees come under federal jurisdiction. As for cashing out unspent balances, the rules vary. A bank-based card, for example, might issue you a check but charge $15 for it.

Hold on tight. If a card is lost or stolen, you could be out the entire sum loaded onto the card. (Gift cards have a load limit, but that can be hundreds of dollars.) Barnes & Noble, for example, won't replace gift cards. Many national retailers will, though they might charge a fee. You'll need to document the card's purchase and provide the ID number.