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Gift cards w/ expiration dates - shady practice?

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I had breakfast today with a friend. He treated because he had a gift card that he'd had for a while. He had used it several times before but still had a $50 balance left on it. The server took the check presenter w/ the gift card and returned a few moments later to advise us that the gift card had expired last month(one year expiration). My friend advised that he wasn't are of an expiration date. The server pointed out some very fine print wherein their was an expiration date.

The server advised that he would consult the owner to see if he would honor it and fortunately they agreed to because of "the economic times" but he made it clear that they "were under no obligation" to do so.

I find it shady that restos, and other retail stores, would place an expiration date in fine print on their gift cards. It's as if they are hoping you don't read the fine print and don't cash in on the gift card and therefore they get "free money". I worked for a local resto and they decided to make the switch from gift certificates to gift cards and we explored all options w/ the card manufacturer. They went over wording that can and/or should be included on the card and one of the things we discussed was an expiration date. They offered statistics on how many purchased gift cards are actually used and also which ones w/ expiration dates are allowed to expire and how much that benefits your bottom line. Again, I find it shady. I understand that no expiration date can complicate bottom lines but, really... Incidentally, the resto I was with opted NOT to print the cards with an expiration date.

Here is a link to a website that lists state gift card laws. Interestingly, many states prohibit expiration dates w/i 2-7 years. http://www.consumersunion.org/pub/cor...

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  1. A few years back, when gift cards were becoming very popular, our local news ran a story warning about this, and it happens in all types of cards, not just restaurants. Now, whenever I purchase a card for a friend I carefully read every single bit of it. Some will even tack on a service charge, so we have to do our homework. Of course it's shady, but that's they way they make money.

    1. The other sneaky thing some retailers do is charge a fee on 'inactive' gift cards so the balance runs down before you get a chance to use it.

      Back in 2007 the Ontario provincial gov't passed a law eliminating expiry dates and various fees on gift cards. I was very happy to see that happen. In Ontario, retailers are also supposed clearly outline any restrictions when you are purchasing a card.

      1. I'm pretty sure that it is illegal in California.

        3 Replies
        1. re: Missmoo

          I'm pretty sure, too. I recently found a 10 year old gift card for a nursery. $15 bought fewer plants now than it would have a decade ago, but they still honored the card. (On the other hand the $25 gift card for a bookstore that's gone out of business is pretty useless.)

          1. re: Glencora

            Do you know if the same law applies to gift certificates?

            1. re: latindancer

              “Gift Card” or “Gift gift Certificate, ” the issue of no expiration dates and being able to return it for cash or for another gift, etc., is a great law but really…. Never buy or accept these crappy "gifts” in the first place. I say that because I have had too many meals ruin because of arguments about "the law" with the manager or being told the $50 card was never activated by the person who took the money from my friend who gave me the "Gift." The way I now look at these "gifts" is that the "friend" or relative giving it to you is saying, "I so did not want to spend my time looking for something special for you so I just got you this crappy card so you can go have an argument about the law with someone over it."

              Here is some legal language to chew on. Note that the language refers to something being “sold” as opposed to something a person or entity might issue as a promotion item. I have never looked for any case law on how this, or more recent amendments and sections, has been applied but that might be worth looking for also.
              http://law.onecle.com/california/civi...

        2. such a weird practice, as the money has already been handed over! money given for no service is not an understandable concept to me... it is not as if inflation has increased so much as to make the 50$ paid equal 5$... it should be honoured.

          1. Good link, LL! Thanks to Attorney General Blumenthal in CT, we are "safe" in CT, but with so many places going out of business, I'm all for giving cash instead of a gift card at this point, just so you don't risk losing the $ altogether.

            http://static.uspirg.org/consumer/arc...

            And on another fine print note, I had received a Visa gift card ("good as cash") and made the mistake of calling the toll-free number on the card to check the balance and was charged a fee for it. Sure, it's in the fine print somewhere, but when there's an 800 number written right on the card, why would you think it cost anything to check the balance? Shysters.

            3 Replies
            1. re: kattyeyes

              Called an 800-# to check the balance and you're charged a fee? Yikes, that 's just plain dirty too. I guess on the upside of things, it makes me appreciate all themore the establishments that don't use expirations or charge ridiculous fees.

              1. re: lynnlato

                The saving grace is there are many restaurants. So I will just go some where else.
                Mess with me once, shame on you, mess with me twice, shame on me.
                You would think in this market they would bend over backwards to keep a customer?

              2. re: kattyeyes

                Don't feel like you're being picked on as a consumer. I recently sold a retail business, in California, that sold gift cards handled through our merchant services (credit card) provider. They had no expiration per the law here. However....... it cost us a 35 cent transaction fee to run the card to see how much was on it. It would happen most often when someone would come in with a gift card and didn't know how much it was for. 35 cents for me to find out! Because of that I thought about a minimum amount it made sense to put on a card for a customer but decided it was just a cost of providing the service. Pretty annoying.

              3. My restaurant sells gift certificates with an expiration date 12 months from the purchase date. From time to time a customer comes in with an outdated certificate and I have always honored it.

                If a customer comes in with, say, a certificate for $100, but they only spend $20, I will re-issue an $80 certificate with the original expiration date. Is that shady? After all, I know that I'll honor the certificate even if they come back in three years (I'm banking on still being here!), but my thinking is that I want them to come back often, use up the certificate and then perhaps start spending some of their own money.

                On the other hand, if someone has a $100 cert and spends $87.50, I'll give them cash change and some sweet talk, hoping that will bring them back again.

                Who am I kidding? I try to sweet-talk everyone who walks in the door if I have a minute. If great food and a smile doesn't work to bring them back, then they weren't coming back anyway!

                14 Replies
                1. re: chefbeth

                  I agree great food and a smile is what its all about. Why play games with expiration dates.?
                  The cash paid to purchase the certificate has no expiration date.
                  I think quality, great service and customer loyalty also never expire.

                  1. re: GodfatherofLunch

                    More states are cracking down on this free-money scam. Isn't it enough unjust enrichment for businesses that so many gift cards get lost and go unredeemed? Must they also sneak by with expirations?

                    1. re: Leonardo

                      In fairness the gift cards that get lost and go unredeemed are not the restaurants doing, but expirations are a scam

                      1. re: GodfatherofLunch

                        Godfather: that's my point. They are already getting free money from lost cards which are of course the customers' fault.
                        They certainly don't need more money in the form of unjust enrichment.

                  2. re: chefbeth

                    In Massachusetts the law requires that give cards remain be valid for 7 years after purchase.

                    1. re: almansa

                      ya know what never expires(inflation not withstanding)? CASH.

                      1. re: nkeane

                        Businesses are already making out like bandits with these things. They've got the money for free until the card is redeemed. Very often the person spends more than just the amount of the card OR doesn't use the whole card. Or doesn't use it at all, as minetioned upthread. And they have a chance to get a new customer. So they need to make the cards expire, too?

                        From the customer's point of view, it is probably kind of non-smart to sit on a restaurant gift card for too long unless it's for a big chain or something. They could always go out of business.

                        1. re: bibi rose

                          exactly Bibi! thats why I boycott GC's. if I want to give someone a nice dinner on me......I just take them to dinner. It really can be that simple people.

                          one time, in the case of me living 1000 miles from the person I wanted to give a nice dinner to, I said "make reservations and let me know when they are". When they did, I called the restaurant and told them that the couples dinner is on me and here is my CC. I followed up by requesting a photocopy of the reciept and cross-checking it with my statement. Yes, its a little more work, but the sincerity of the gesture was infinately more Tangible then a GC(imo).

                          1. re: bibi rose

                            That's not really proper business accounting. We don't consider it a sale until the gift card is redeemed. Really it's frustrating to have to subtract gift card purchases from gross sales when you look at the daily bottom line.

                            1. re: almansa

                              It's "money in the bank" you wouldn't have otherwise isn't it?

                              1. re: monku

                                Just a note on the unused cards - many states have an "unclaimed/abandoned property/monies " law that requires businesses to turn the funds over to the state for unredeemed gift cards/certificates. The length of time before they become abandoned varies from state to state.
                                Businesses who honestly report the sales and redemption of gift certificates/cards do not get any "free money" from the transaction as they must turn the funds over to the state at the time they become "abandoned".

                        2. re: almansa

                          More precisely, MA law states that they must be valid for at least seven years, and that if the expiration date in not clearly stated on a card it is valid indefinitely.

                          1. re: BobB

                            What about the odious annual "service charge" where they take out $5 per year?

                            1. re: BobB

                              Interestingly, in MA if you have a balance of $5 or less you can request to cash it out. Click on link in my OP for details for each state.

                        3. From the business's point of view, there needs to be some point when the potential liability (the outstanding credit card) gets written off. Otherwise at the end of a five year period, the number of outstanding cards may be larger than the assets. While I don't think that everyone with cards is going to show up at the same time and cripple the business, there is some need to have an end date on the card.

                          1 Reply
                          1. re: alwayscooking

                            I hear what your saying AC, but I think the person that brings in a 10 yr old gift card/certificate is very rare. Usually, after a year or two the resto can pretty bank on that card being forever gone and they have free money in their pockets. Having previously worked at a resto that had gift certificates w/o expiration dates, we very rarely had a guest present a dinosaur gift certificate. The owner happily honored them and its one of the reasons everyone loves him and his establishment after many years.

                          2. I think there should be a distinction between full-price gift cards and discount gift cards. If you pay $50 for a $50 card, it should be good indefinitely. The restaurant got your money, you should be able to get their food. But sometimes you see offers to get $50 card for, say, $20; I don't have as much of a problem with an expiration date in that situation - the card is more like a coupon, which the restaurant shouldn't have to honor forever.

                            1 Reply
                            1. re: alanbarnes

                              Good point, AB.

                            2. I have been given two gift certificates over the years. Both were very large in value. Large enough that we put them in a drawer to use for a birthday or anniversary. But before the next birthday, both restaurants had gone out of business. Sickens me that these funds were wasted so totally.

                              I never give gift certificates for this reason.... well, except for an amazon one every Xmas for the kid. But she spends it within moments of opening.

                              13 Replies
                              1. re: smtucker

                                Locally there was a restaurant that changed owners that had several thousand dollars worth of Gift Certificates(GCs) in limbo. The new owners refused to honor them till an attorney happened to have a few hundred dollars worth.

                                From what I understood is that business property assets/liabilities (monies paid in advance/due/past due/general accounting/etc.) must be fully disclosed upon sale or transfer. Anyway the attorney got whatever solved with the former/current owners so the customers could redeem their GCs. The attorney let it slip that property liens is thing of a last resort.

                                1. re: RShea78

                                  " The attorney let it slip that property liens is thing of a last resort."

                                  not in my line of work(new construction)! its first and foremost! a "right to lien" is filed before one stake is driven into the ground!

                                  as far as a new owner of a business not honoring a GC from before they owned it: that is totally BUNK! they bought the business, and with it comes assets AND debts. A GC and any promo(coupons) is part of the deal.

                                  1. re: nkeane

                                    "they bought the business, and with it comes assets AND debts"

                                    Not always.

                                    One can buy the assets and not the liabilities. Take a look at the papers and all the companies being bought with unsecured lenders not receiving their money.

                                    1. re: jfood

                                      A gift card is a contract with a third party. A sale cannot unilaterally negate that contract. That violates public policy to allow that.

                                      1. re: Leonardo

                                        A sale of a business doesn't negate anything. If the buyer of the business does not assume its liabilities, the customer still has a claim. But it is against the seller, not the new owner.

                                        The problem tends to be enforcing that claim. Public policy doesn't require that every obligation be paid in full; people default on their debts all the time.

                                        1. re: alanbarnes

                                          Thanks Al, that was jfood's point. the new owner can buy the business but not all of the liabilites. They can direct you to the previous owner for the claim.

                                          1. re: jfood

                                            that sounds about right. but then again, they would be seeing me for the last time. I think it would be in the new owners best interest, barring a huge outstanding balance of gift cards, to go into the venture prepared to honor them.

                                            1. re: jfood

                                              >>the new owner can buy the business but not all of the liabilites. They can direct you to the previous owner for the claim.<<

                                              That is why it must be fully disclosed, at least in my State. In the transfer of real estate, unsettled debts go with the property regardless of assumed ownership. It is always in the best interest for two parties to work things out before it becomes a problem (or a lien).

                                              BTY- Funny thing happened at "high noon" when the new owners took possession of the property, failed to notify the the utility company of the transfer. Bells, whistles, and hoop-la happened in the dark with utility meters getting pulled.

                                              1. re: RShea78

                                                Can't wait to see the reaction of the town clerk when someone walks in and wants to place a lien on a gift card or a lien on real property for a gift car.

                                                That is probably related to debt associated with the real property. A gift card is about as far from a secured lein/UCC holder as jfood can thinl of.

                                                1. re: jfood

                                                  I believe the whole thing is about honoring a promise using a prepaid gift certificate/card as an instrument- just like that of a check.

                                                  1. re: RShea78

                                                    and so does jfood but the new owner was not a party to the GC purhcase and may not even know about it.

                                                    1. re: jfood

                                                      Problem is that ignorance of such an existence makes a poor defense, as far as a new owner is concerned. Business, or property for the matter, can have skeletons in the closets with empty pockets.

                                          2. re: Leonardo

                                            >>A gift card is a contract with a third party.<<

                                            You speak of Gift Cards as if they are all like a prepaid Visa/Master Card (aka 3rd party) version. Ones I am in discussion about, are of a "Buy Here - Redeem Here" version. Small Business owners are not about to fee themselves to death going with a 3rd party source.

                                  2. I did a search for gift card software and stumbled upon this site:

                                    http://www.jollytech.com/gift_card_so...

                                    The first line I read on the site was this:

                                    Interesting statistics:
                                    28% of gift cards are never redeemed

                                    That's code for "free money"!!! :)

                                    2 Replies
                                    1. re: lynnlato

                                      >>Interesting statistics: 28% of gift cards are never redeemed <<

                                      I think the longest I ever held on to a gift certificate was 6 months, but that was a fluke and long story. (short version was they had nothing I could redeem it on, without coughing up mega-bucks to boot. $25 GC with everything over $100. Okay, they did have some hotel sized soap-on-a-rope for $90, good for one shower!)

                                      Otherwise, I redeem them in less than a week, because they simply burn my posterior. Flames at 11:00. ;-)

                                      1. re: RShea78

                                        I know, I true to do the same, RShea. But because I fear losing or misplacing them. And then when I don't redeem it for the full amount and have a balance on the stupid card... well, that really chaps my a**.