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The hidden risks of giving gift cards

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Gift cards may be an easy present option, especially for those tricky-to-buy-for family members. But it’s worth remembering they come with some downsides.

Gift cards offer the recipient the flexibility to spend them when they want, but four in five carry expiry dates so if the card gets lost under a pile of paperwork, they could end up worthless.

Consumer group Fairer Finance looked into 72 gift cards from major retailers and found that 65 come with an expiry date and of these, 57 expired in two years or less. On top of this, 49 only stated the expiry date in the terms and conditions or FAQs.

But expiry dates aren’t the only pitfall that can leave you out of pocket. If a company goes bust, there is no formal protection for gift card holders.

The number of major retailers hitting financial difficulty has been increasing in recent months, with Toys R Us, Maplin, House of Fraser and Poundworld all going into administration over the past year

James Daley, managing director of Fairer Finance, said: “Hundreds of thousands of people will be receiving gift cards this Christmas – many of which will never get used because they expire, or the retailer goes out of business. The fact that there is still no proper protection for consumers stands in stark contrast to the spirit in which gift cards are given.

“There’s no good reason why shops should be allowed to add expiry dates to gift cards. The value of the card is eroded by inflation every day that a card goes unspent. And the likelihood of cards being used after a year is fairly low – as a significant number of cards are lost or forgotten.”

According to Fairer Finance, the gift card market has doubled in size in the last five years, and is currently worth more than £6bn annually. Consumers lose out on over £300m a year from buying gift cards – through losing them, not using them before expiry, not being able to use them during a company’s administration period, or not being able to receive refunds if a company enters liquidation.

Daley said: “Gift cardholders deserve much better protection when companies run into trouble. We’re seeing a growing number of insolvencies on our high streets, and it’s only right that people’s Christmas presents can’t suddenly evaporate and become worthless when this happens. We’d like to see the government legislate in this area. But as a first step, we’d like to see retailers voluntarily working with the British Retail Consortium to find a solution.”

Fairer Finance is calling on the government to implement its three proposed solutions:

  1. Ban the sale of gift cards with expiry dates.
  2. Ensure gift cards are honoured when a company is in a period of administration.
  3. Force retailers to ring-fence funds from all gift cards bought in the last five years, to ensure refunds are available for up to one year in the event of liquidation.

Gift cards with expiry dates of less than 2 years.

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