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Canadian Bank-Issued Gift Cards: Go For It Or Beware?
Gift cards can be the perfect gifts for holidays, birthdays, anniversaries, and just because. However, you may be torn as to which cards to buy. By knowing the pros and cons of each, you can determine which card is the best card for you to purchase.
Gift card sales generated approximately six billion dollars in Canada in 2010. This is a testament to how much gift card sales boom. This has a lot to do with how they resemble credit cards and have value that can be spent toward practically anything. Essentially, these are prepaid cards with a specific value. Purchases made with the card are deducted until the balance is zero.
While gift cards sound great, and they are, but not all of them are created equal. It is very important to read the terms and conditions of gift cards because there are some cards that may pack a few surprises. Nonetheless, Canada has a few provincial regulations that are designed to protect consumers who use store-branded gift cards. For instance, in Ontario, a store must fully disclose all of the terms of their gift cards. All limitations and fees must be disclosed. Expiration dates must be excluded unless the card is for a specific good or service. Fees must also be restricted to card replacement and customization.
When it comes to bank-issued gift cards, this is not actually the case. Bank-issued gift cards are completely different entities from store-issued gift cards.
The Bank-Issued Card
Bank-issued gift cards are exempt from the rules set by the provinces. This is because of the fact the federal Ministry of Finance is behind the regulation of banks in Canada. Because they are not subject to provincial restrictions, many bank gift cards have expiration dates and additional charges that can present consumers with quite the surprise. There are some rather common fees that are tacked onto these gift cards.
The first fee is the purchase fee. A bank may charge a purchase fee when the gift card is first purchased. This is something that is not seen with store-issued cards. Sometimes the fees are called "loading fees." The exact fee amount depends on the value of the gift card. For instance, the bank issuing the gift card may charge $3.95 per $25 card. Another example is a bank that charges a flat fee for a gift card regardless of the amount. In addition, retail taxes are paid on any purchase fees that are applied to the card.
Second is a monthly maintenance fee. An activated card can have charge-free periods that last up to 12 months. This can be great, but the monthly maintenance fee will be applied after that period. This is a fee that should be verified in advance so you can make an informed decision regarding what gift card may be best for you. It is also important to note that the fees can change with the terms and conditions of the card. Banks have a tendency to change their charge-free periods and the amount of the fee.
Third are the service fees. It is not uncommon for a bank to charge a small fee for each call to their toll-free number just to listen to a recording. If a person has to talk to a customer service representative, that fee can go up. Nonetheless, there are some banks that do allow calls for free. Either these free calls can be made to check gift card balances, but there may still be a charge to talk to a representative. In other words, special requests tend to cost.
The fourth fee is the expiry date fee. If there is an expiration date, then the bank may charge a cancellation fee that is equal to the balance that is on the card. This means if you don't use the balance by the expiration date, the bank will take the leftover amount. There are some bank gift cards that don't have expiration dates, so there are not any fees.
The fifth fee is the replacement fee. If your gift card is lost or stolen, then the bank may charge a rather high amount to replace the card. Sometimes the only way to replace the card is to pre-register it. If it isn't pre-registered, it may be a loss. Some companies may issue free replacements with the presentation of the original receipt and the card number. Sixth are currency exchange fees. Most Canadian bank gift cards are usable in the United States. However, items in the United States are, of course, priced in American currency. This means that an additional 2.5 percent is usually added to the already increased exchange rate.
There are also miscellaneous fees. If there is a pricing error or you need documentation for a refund, the bank is going to charge extra for the paperwork. Another fee associated with miscellaneous fees is the potential shipping charge associated with buying cards online.
A Math Problem
To figure out what is best for you in regards to gift cards, simply do the math. If you buy a gift card for $100 at a purchase fee of $4.95 in Ontario and you pay Ontario's retail tax on the purchase, you will pay $105.59 to get the card. Factor in a maintenance fee of $2 for six months, $6 in service fees, a card replacement fee of $20 because the card was lost, and a shipping charge of $2.99 because you purchased the card online, the total cost is $146.58 to have the card. Consider the fact that the fees equal nearly half the value of the card. That technically leaves you with just $53.42 to spend.
It is best to evaluate the different bank gift cards that are available since they are all not created the same. Consider how much you would have to pay in fees to have the card when determining whether or not a card is the right one for you.
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