Legislation looks to curb gift-card fees

Michelle Ma

Lauren Sprigg was thrilled when she received a gift card from her aunt when her family was living overseas. But by the time the Music sophomore wanted to spend it, there was no money on the card.

“I understand that (businesses) want to encourage you to use the card as quickly as possible, but basically they were taking my aunt’s money and not letting me use it either,” Sprigg said. “It would have been better to have just gotten money or a gift.”

The Illinois State Treasury’s Office sympathizes with people such as Sprigg who have been charged fees on gift card balances.

State legislation proposed in January either would cut all extra fees deducted from gift cards or would send fees incurred to the state treasury department, which would then return the money to card owners.

This year’s holiday shoppers spent $17 billion on gift cards, according to the National Retail Federation.

“We want to make sure customers get what they pay for,” said Carolyn Barry Frost, press secretary for the treasurer.

According to economics Lecturer Mark Witte, companies that sell gift cards cannot declare revenue as profit until the card is used.

“(Money from) cards sold must be put into a small account separate from normal business workings,” he said. “Banks don’t like to keep small accounts since they are expensive to maintain.”

Although many businesses are cutting down on fees charged to gift cards, some companies said they deduct charges each month after periods of idleness, ranging from 12 to 24 months.

According to Illinois State Treasurer Judy Baar Topinka, some companies that don’t put expiration dates on cards face a disadvantage because customers can keep cards for long periods. As a result businesses often deduct small fees — usually $1 or $2 charges — to ensure unused money on the card won’t exist indefinitely.

The proposed legislation still faces a lengthy approval process by the state House of Representatives, Senate and Gov. Rod Blagojevich.

“It sounds to me like another way to bring in money for the government,” Witte said. “It will be hard for the state to track customers to return money because cards are anonymous and pre-paid.”

Weinberg freshman Kunal Kadakia said the proposed legislation won’t really affect him because he spends gift cards so quickly.

“Gift cards are easier to manage (because) they are smaller, like a debit card, and you don’t need cash,” he said. “I like to shop, so I use them right away.”