Wallingford, Connecticut (PressExposure) December 05, 2008 -- Hard cash is on many wish lists this year as families try to find a balance between holiday spending and paying for essentials. A popular option this season is the pre-paid bank card, or as they are also known, âstored-valueâ cards.
The cards are similar to pre-paid gift cards but may be used anywhere credit cards are accepted, allowing shoppers more flexibility as to where the money can be spent. These cards, however, are not without a downside and Connecticut BBB is providing advice on the purchase and use of pre-paid bank cards.
Connecticut Better Business Bureau President, Paulette Hotton Scarpetti, says buyers and recipients of these cards must pay special attention to their terms and limitations.
âUse of these pre-paid bank cards may involve substantial fees and limitations, and they vary, so BBB recommends consumers pay special attention to details when giving or using a pre-paid bank card. In other words, read the fine print and ask lots of questions about the cardsâ restrictions.â
One BBB recently researched one bank-issued card and discovered more than 27 different fees, ranging from under a dollar to $20. These fees may be attached to contacting customer service, loading more money onto the card (recharging), and inactivity. One card even had a weekly base fee of $1.95, which adds up to more than $100 a year to use the card.
Pre-paid cards are often branded by major credit card companies, and while they promise zero or limited liability if a credit card is lost or stolen, the same protections do not necessarily apply to stored-value cards, which should outline whatever protection is afforded to the holder.
Retail gift cards â Buyer beware! In the midst of the recent closures and bankruptcies of several major retail chains, consumers are concerned about buying gift cards and what might happen if the store goes out of business before the card is used.
According to Scarpetti, consumers have good reason to think carefully before deciding whether to buy a store gift card.
âBecause there is no way of telling in advance whether a retailer will go out of business, your BBB advises you think carefully about gift card giving. The sad fact is that if a retailer closes its doors before a gift card is used, the holder is typically left with a worthless piece of plastic.â
Many consumers, in an effort to avoid a âholiday credit card hangoverâ are increasingly turning to debit cards and cash purchases, and even giving cash or checks as presents rather than gift cards.
What if your favorite store goes bankrupt? If a store files for Chapter 11 bankruptcy protection, it a signal it intends to continue operations while sorting out its financial problems. While some may still honor gift cards others have no choice but to stop redeeming them. Gift cards are treated as a loan to the company, not as cash.
If, however, the firm is filing for Chapter 7, meaning it intends to give up and simply close down, consumers are at the back of the line behind creditors who are owed money.
Connecticut BBB has some pointers when considering buying a gift card:
-Check out businesses at http://www.bbb.org to see whether any government actions or bankruptcy information is posted on a Reliability Report.
-Ask if the gift card has an expiration date or may be redeemed online and whether there are any location limitations using the card.
Finally, if you receive a gift card, use it as soon as possible. You never know how long its issuer will be in business.
For more information on giving and using gift cards, and managing credit and debit cards this holiday season, go to http://www.bbb.org.