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7 tips to prevent a gift card nightmare

Gift cards that can be used anywhere are now more popular than cards for specific stores, like Best Buy, Apple or Barnes & Noble. But these general purpose cards come with strings attached for both those who give and receive them.

It’s better for me to go ahead and admit up front I’m a cheap guy. I love a deal, so when I recently had to switch dentists and found one offering $25 American Express gift cards to new patients, I noticed. It wasn’t the main factor in my decision, but it definitely didn’t hurt.

Soon I had clean teeth and $25 I could spend almost anywhere. Or so I thought. The gift card was declined at a restaurant, grocery store and gift shop.

These cards issued by MasterCard, Visa, American Express and Discover are known in the industry as general purpose gift cards. In theory, you can use them anywhere credit cards are accepted, making them more flexible than, say, Best Buy or Apple gift cards. But in practice, spending general purpose gift cards can be a hassle, something more and more Americans are learning as the popularity of these cards surges.

“The largest complaint that we keep hearing is the inability to use up all of the funds on the card,” says Michelle Jun, a senior attorney and gift card expert at Consumers Union. “And we have heard this complaint again and again.”


Preparation is key for any shopper who wants to be sure to spend every last dime on a general purpose gift card. Card companies and experts offer these 7 gift card tips to make sure you’re not leaving any loot behind:

1. Know your card’s balance, which you can quickly check online or by phone.

2. Gas pumps may reject a gift card if its value is below a certain amount. Stations do this to prevent drivers from buying more gas than they can pay for. Pay inside the station before pumping.

3. In restaurants or other places where you sign for a tip, the merchant's system will typically preauthorize a charge 20 percent or higher than your bill. That’s to make sure you can pay the tip. This can screw up a gift card transaction and possibly freeze your money. It may be easiest not to use general purpose gift cards when dining out.

4. If your gift card won’t cover the whole bill, tell the store exactly how much is on it. Then pay the difference via cash or credit card before they swipe the gift card.

5. If a store can’t process this kind of split transaction, try a workaround. Ask if you can use your general purpose gift card to purchase a gift card for that store. Store point-of-sale systems are designed to accommodate combining store gift cards with other payments (In fact, CEB TowerGroup finds that the typical consumer ends up spending 30 percent more than the gift card is worth. So stores make sure not to lose out on this extra money). Then you can complete your purchase combining that entire store gift card with your own credit card.

6. Communication is vital. Your success in spending your entire balance may hinge on how well you can explain all of this to a teenage cashier. Know your facts and be clear and polite in telling the cashier what you need done.

7. Finally, keep the card in your wallet so you remember to use it. There are literally billions of dollars locked away unspent on gift cards forgotten in junk drawers or accidentally discarded. Spend the money as soon as possible.


My complaint was bigger. I wasn’t able to spend any of my funds. After my third denial, I called AmEx’s customer service line to see what was going on. Following a lot of button-pushing and waiting, I finally had a guy in New Delhi with some answers. The rep's phone name was "Andrew."

In unfailingly polite speech over a crackly line, he calmly explained that the restaurant had swiped my card. And even though it didn’t take the money, the swipe put a pending charge on my card for the full amount. That effectively put all my money in purgatory. “Andrew’s” explanation was apparently inspired by the Book of Genesis.

“It stays for seven days,” he intoned. “On the eighth day, on the eighth calendar day... if the merchant does not claim the funds, then this amount comes back on the card automatically.”

This frozen-funds phenomenon is exactly the opposite of what these general purpose gift cards claim to offer: flexibility and convenience. If you have a gift card to Best Buy or Amazon, you’re stuck spending it there. General purpose cards from AmEx and others should work almost anywhere. That promise is part of why this type of gift card is growing.

CEB TowerGroup forecasts general purpose gift cards will add up to $42 billion this year. They surpassed retail-store gift cards in 2011. Analyst Brian Riley says they became especially popular during the recession, when people wanted cards that could be used for basic needs like groceries and gas, not just splurges at electronics and clothing stores.

It’s not just card recipients who get frustrated about them. General purpose cards aren’t exactly a great deal for the giver either. Unlike store gift cards, general purpose cards are packed with purchase fees, ranging from $2 to $6, says says Janna Herron, who surveyed gift cards for Bankrate.com.

“That means if you were buying a $25 gift card, you have to pay, you know, $28 to $29 to get the gift card. Whereas with the store branded cards, you just pay the $25,” she says.

CEB TowerGroup says the average gift card is worth $45. So to put that on a general purpose card, you could pay a whopping 13 percent premium. That’s why last Christmas, Herron gave a couple relatives store cards instead.

"I'm a little bit frugal and I didn't want to spend the extra $2 to $3 for a gift card and that extra $2 to $3 could be used for a stocking stuffer for my son," Herron explained.

Herron and Jun at Consumers Union both recommend a check or cash instead of a general purpose gift card, though of course it’s best to avoid mailing cash.

It’s not that credit card companies are trying the make the cards difficult to use. In fact, they love it when people use them. Every time a card is swiped, AmEx and all the rest take a cut of the sale from stores.

“The primary money they’ll make on it are the transaction fees going through,” says CEB TowerGroup’s Brian Riley.

The $25 on my gift card is now unfrozen, so I’m hoping I’ll have better luck finding somewhere that’ll let me spend it.

Mark Garrison: I’ll admit it. I’m a cheap guy. So when I had to switch dentists and found one offering $25 American Express gift cards to new patients, I noticed. It wasn’t the main factor, but it definitely didn’t hurt. Soon I had clean teeth, and 25 bucks I could spend almost anywhere. Or so I thought. The gift card was declined at a restaurant, grocery store and gift shop. Michelle Jun at Consumers Union says many people run into problems with these cards.

Michelle Jun: Lately, the largest complaint that we keep hearing is the inability to use up all of the funds on the card. And we have heard this complaint again and again.

I wasn’t able to spend any of my funds. After my third denial, I called AmEx’s customer service line to see what was going on. Once I had pressed lots of buttons and waited, finally I had a guy in New Delhi with some answers.

Andrew: Sir, my name is Andrew and how may I help you?

The restaurant had swiped my card, but it was declined. Even though the restaurant didn’t take the money, the swipe put a pending charge on my card for the full amount. So all my money was in purgatory. Andrew’s explanation was apparently inspired by the Book of Genesis.

Andrew: It stays for seven days. On the eighth day, on the eighth calendar day, the pending charge is, like, if the merchant does not claim the funds, then this amount comes back on the card automatically.

Having your funds frozen is just one problem more and more consumers are learning about as these general purpose cards grow in popularity. CEB TowerGroup analyst Brian Riley tracks gift cards.

Brian Riley: During the recession is really when they tweaked up a little bit faster than the others.

General purpose cards surpassed retail store gift cards in 2011. Riley forecasts they’ll add up to $42 billion this year. We’ll have some tips in a moment on making sure you’re able to spend your share of that. But it’s not just recipients who get frustrated about them. General purpose cards aren’t exactly a great deal for the giver either. Janna Herron surveyed them for Bankrate.com. She found they’re packed with purchase fees.

Janna Herron: That ranged between $2-6 depending on the gift card. And so that means if you were buying a $25 gift card, you have to pay, you know, $28-29 to get the gift card. Whereas with the store branded cards, you just pay the $25.

CEB TowerGroup says the average gift card is worth $45. So to put that on a general purpose card, you could pay a whopping 13 percent premium. That’s why last Christmas, Herron gave her nephew a Best Buy store card instead.

Herron: I’m a little bit frugal and I didn’t want to spend the extra $2-3 for a gift card and that extra $2-3 could be used for a stocking stuffer for my son.

She and Consumers Union’s Michelle Jun both recommend a check or cash instead of a general purpose gift card, though of course it’s best to avoid mailing cash. It’s not that credit card companies are trying the make the cards difficult to use. Quite the opposite. The analyst Riley points out that every time a card is swiped, AmEX and all the rest take a cut from stores.

Riley: The primary money they’ll make on it are the transaction fees going through.

But to actually make that gift card transaction work, you need to be prepared. Card companies and experts say to avoid missing out, know your card’s balance, which you can check online or by phone. If your card won’t cover the whole bill, tell the store exactly how much is on your card. Then pay the difference before they swipe it. Your success may hinge on how well you explain this to a teenage cashier. Again, Bankrate’s Janna Herron.

Herron: You might find that you might have to do things a little differently and it might be more inconvenient than you thought it would be.

Gas pumps may reject a gift card if its value is less than required to fill up your tank. You should pay inside before pumping. Restaurants typically preauthorize a higher charge than your bill to make sure you can pay the tip. This can screw up a gift card transaction, so it may be easiest not to use general purpose gift cards when dining out.

In New York, hoping I find somewhere that’ll let me spend that $25, I'm Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter for Marketplace and substitute host for the Marketplace Morning Report, based in New York.
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I typically convert general purpose gift cards to Amazon gift cards. You can simply apply these to your account and they're used in their entirety as you purchase.

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