What is the Gift Card Expiration Date Federal Law?

gift card expiration date federal law

If you’re a small or independent business in the US you’ll find this post helpful. We will look at how you can sell gift cards, while still complying with the gift card expiration date federal law and at the state level. We will also discuss how the federal Credit Card Act affects your business and what types of gift cards are affected.

Please note! This post is just a general overview to help understand the federal act. It should no way be considered legal advice or considered legal counsel. We recommend after reading this article to get your own advisors on the law before proceeding.

Why did the Congress introduce gift card expiration date Federal law? 

 

Federal Congress introduced the Credit Card Accountability Responsibility and Disclosure Act of 2009

(Otherwise known as the Credit CARD Act of 2009).

As of 2009, federal congress updated consumer protection law for the regulation of credit cards which includes gift cards and gift certificates.

It came about to prevent large companies from abusing the credit card system. In previous years these companies would jack up interest rates without warning to their customers. This was even extended to gift cards, where companies would apply inactivity fees on gift cards that weren’t used within a time frame. This resulted in many gift cards draining of their balance before consumers got around to spending them. It was also seen as unfair to put a short expiry date on gift cards, which resulted in many consumers having cards expiring before they finally got around to using them.

What are the biggest changes to gift cards and certificates?

The biggest changes around selling gift cards are the lengthened expiry dates. All monetary gift cards have to be valid for a minimum of 5 years. The legislation has decided that a fair length of time to allow consumers to spend their gift cards is a minimum of 60 months.

Consequences of violating the Credit Card Act of 2009

There are some serious consequences to violating the terms of the Credit Card Act which can result in extortionate fines of between $500 and $5000 for each violation.

But don’t fret! Read on to see what you can do to sell gift cards ethically and lawfully to avoid those big fines.

To understand what you can do, first, we need to define gifts cards and establish the different types of gift cards that you will be selling for your business.

What is a gift card?

Gift cards are generally defined as the same thing across the whole of North America. But when it comes to laws and legislation it is important to review and pin down exactly what is meant by a gift card, because different rules can apply in different states. Let’s take a look.

The federal law groups gift cards, gift certificates, gift vouchers and gift experiences as the following in the Credit CARD Act of 2009

Gift certificate means a card, code, or another device that is:

    • Issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in a specified amount that may not be increased or reloaded in exchange for payment; and
    • Redeemable upon presentation at a single merchant or an affiliated group of merchants for goods or services.

Store gift card means a card, code, or another device that is:

    • Issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in a specified amount, whether or not that amount may be increased or reloaded, in exchange for payment; and
    • Redeemable upon presentation at a single merchant or an affiliated group of merchants for goods or services.

There are also state definitions too. Here are a few examples of definitions by states

 

Florida
    • “Gift certificate” means a certificate, gift card, stored value card, or similar instrument issued in exchange for monetary consideration when the certificate, card, or similar instrument is redeemable for merchandise, food, or services regardless of whether any cash may be paid to the owner of the certificate, card, or instrument as part of the redemption transaction.
Hawaii
    • “Gift certificate” or “certificate” includes any electronic card with a banked dollar value where the issuer has received payment for the full banked dollar value for the future purchase or delivery of goods or services, any certificate where the issuer has received payment for the full face value of the certificate for future purchases or delivery of goods or services, and any other medium that evidences the giving of consideration in exchange for the right to redeem the certificate, electronic card, or other medium for goods, food, or services of at least an equal value.
Arizona
    • “Gift card” means any gift certificate, gift card or electronic gift card or any other medium issued or sold after October 31, 2005, for which the issuer has received payment for the full face value or full banked dollar value of the card for the future purchase or delivery of goods or services.”

You can find out what your state refers to a gift card as here.

 

To make it easier to digest the law and legislation around gift cards we like to split our gift card types into two categories and simplify our definition:

  1. Monetary gift cards (denominated)

  2. Experience gift cards

Monetary Gift Card

Monetary Gift Card

A monetary gift card is a general use prepaid card that has a monetary value (denomination amount) specified on the card. E.G a $50 gift card.

Experience Gift Card

Experience Gift Card

An experience gift card is a general use prepaid card that doesn’t have a monetary value specified on the card, instead, it has the description of a service. E.G a 50-minute full body massage.

What kind of gift cards are subject to the card act?

This brings us to our next question. Which type of gift cards apply to the Credit CARD Act of 2009?

Gift cards with a specified denomination of dollar to spend MUST adhere to the Credit CARD Act of 2009!

To clarify: If you sell a gift card with a monetary amount (e.g $50 Dollars), you must now comply with federal law. But there are a few exceptions.

Exceptions to the Gift Card Act

If you’re in the service and experience industry your in luck.

Experience gift cards are EXEMPT from the Credit CARD Act of 2009!

To clarify: Experience gift cards, (which are defined as gift cards or certificates issued for a specific good, service or experience that DO NOT have a specific monetary amount to spend) are EXEMPT from federal law.

However, exemption from federal law does still require you to abide by your own state law for further expiration restrictions. Check out your state law here by just typing your state into the search bar.

Statutory exclusions

If your monetary gift cards are subject to the federal law, it may still qualify for an exclusion under these “statutory exclusions”. Which are:

  1. Useable solely for telephone services;
  2. Reloadable and not marketed or labelled as a gift card or gift certificate;
  3. A loyalty, award, or promotional gift card;
  4. Not marketed to the general public;
  5. Issued in paper form only; or
  6. Redeemable solely for admission to events or venues.

We must clarify: Issued in paper form is ONLY issued by paper form. If the gift card was printed via an electronic sale online or at a retailer’s physical location, where an electronic copy can be sent via email or printed, this does not qualify.

Exemption from federal law, what to do next

If your gift cards are exempt from the federal Credit Card Act, then you MUST refer to your individual state law.

For more information of gift card individual state law see this link here.

 

gift card expiration date federal law

Gift Card Expiration Date Federal Law

 

State Law vs Federal Law

You need to do some homework and find out if your state law is more or less restrictive on expiration dates than the federal law of 5 years (60 months).

State law expiration dates are MORE than 5 years:

If your state law has a longer expiration date than 5 years, then the federal law won’t be affecting you much, and you’ll need to adhere to your state law.

Generally, federal law does pre-empt state law. But in the case of consumer protection, the Credit Card Act only pre-empts state law when they are inconsistent with its protections. For example, states like California and Florida have prohibited expiration dates. In these cases, expiration dates are not allowed on gift cards as this gives the best situation for consumers, not businesses.

State law expiration dates are LESS than 5 years:

If your state law has a shorter expiration date on monetary gift cards (denominated amount) than the federal law, then there are a few things for you to consider:

  1. Switch the monetary gift card to the expiry date of 5 years to comply with the overriding state law.
  2. Amend your monetary value gift cards to ‘experience gift cards’, this way the experience gift card can follow your own states expiration date.

E.g If your state expiration date is two years, an experience gift card such as a “50-minute massage” (with no monetary value specified on the gift card), can expire in a year. But you’ll need to allow the amount paid for the gift card to be available for the two years’ expiration date, required by states minimum term.

However, you MUST clearly clarify the expiration date on the gift experience card.

Setting your gift card expiration dates

Setting the expiration dates on your gift cards is a very important aspect and one not to get wrong. If you don’t display an expiry date, then according to some states there is no expiry date.

Here are some ideas on how you can set your expiration dates to comply with gift card legislation and law.

Monetary value gift cards expiry date

Monetary value gift cards expiry date

Monetary value gift cards

Set only one expiry date clearly on your gift card, at either the federal five-year amount or your states minimum term (if it is longer than five years).

Exceptions are the states who prohibit expiration dates, unfortunately you won’t be able to set an expiry date if this is the case.

Experience gift cards

experience gift cards expiry date

experience gift cards expiry date

For service or experience gift cards you could consider two dates.

  1. The first date must be the time frame of which you’ll honour the service. You could call this “Use by [date]”.

E.g 12 months is an appropriate length of time to let service or experiences expire as it gives a fair amount of time for the consumer to use the gift card.

  1. The second expiration date needs to be the states minimum expiration to refund the amount paid for the gift card. You could call this “Funds valid until [date]”.

E.g New Jersey has a minimum expiration of 24 months following the date of the sale.

For states with no expiry required, you only need to apply the initial expiration date of the service.

E.g The state of Utah only requires you to make the expiration date clear on the gift card. In this case, only the first expiration date needs to apply.

 

Look out!

we will soon be writing a post on the expiry date on gift vouchers law for the UK and Canada.

Getting started with gift cards

If you have been put off by the laws and legislation around gift cards, then don’t let it frighten you. The benefits of selling gift cards and gift experiences far outweigh the initial research and legal advice you need to seek to begin your journey.

One of our clients The Celtic Manor Resort has grown experience gift card sales from $850k to $2.9 million per year! As you’ll see the results are worth it.

See what benefits of using a gift card management system can bring to your business here.

At Enjovia, we provide solutions to your gift card problems and help you get on the right track. Just get in touch and you can begin selling your services as gift experiences today!

gift card system software