They’re the last refuge of the desperate shopper so it’s no surprise that gift-card sales usually surge on Christmas Eve. But while they may be a quick fix for shopping dilemmas, gift cards can turn out to be little more than a gift to the retailer.

Expiry dates

Retailers are coy about revealing how much they earn from unredeemed cards and exact figures are hard to pin down. But overseas research suggests between 10 and 27 percent of gift cards are never redeemed. With the gift-card market reported to be buoyant, their value to retailers could run into millions.

Overseas research suggests between 10 and 27 percent of gift cards are never redeemed.
Overseas research suggests between 10 and 27 percent of gift cards are never redeemed.

Some gift cards never get used because people simply forget they have them. But strict expiry dates also mean the cards can become worthless before you try to redeem them.

Of 15 gift cards we looked at (see our table below), most were valid for just 12 months. 5 cards offered a more generous 24 months (Farmers, Gardening NZ, Mitre 10, The Warehouse and Whitcoulls). Bunnings and Glassons were the only stores that had cards without an expiry date.

Several retailers told us they offered “grace periods” to allow cards to be redeemed after they expired. Countdown said it gives 1-month’s grace, while shopping mall operator Westfield allows a 3-month window.

Major player Epay, which operates gift-card programmes on behalf of various retailers, said it provides a grace period of a minimum 14 days for the cards it sells. The company operates the “Gift Station” displays found in supermarkets and other retail outlets.

But grace periods aren’t advertised and unless you ask you may not find out about them. Any money remaining on the card won’t be refunded.

You may also lose out if you misplace your card. While gift cards leave an electronic footprint and retailers are usually able to cancel them if they suspect misuse, terms and conditions often state the card should be treated like cash and it won’t be replaced if lost or stolen.

Some companies told us this wasn’t a hard and fast rule. Epay said it would consider replacing a card if the customer was able to provide the card number or a transaction receipt. An administration fee, up to $10, normally applies to reissue a card. Other companies said they’d also be willing to reissue a card in these circumstances.

Yet we found few retailers set this out in their written terms. Of those that did, Kiwibank, which operates the Prezzy Card, will replace a lost or stolen card for a $20 fee if the card was registered online. Westfield also states it will replace cards if you can provide proof of purchase. It charges a $5 replacement fee.

Consumers disadvantaged

Retailers stand to gain significant benefits from gift-card sales. They get payment in advance. They also have the prospect of further sales when the card is used: retail data indicate that customers who redeem gift cards often spend more than the value of the card.

But strict expiry dates disadvantage consumers. Recognition of this has forced law changes in other countries.

Since 2010 gift cards in the US have been required to have an expiry date of at least 5 years. Many Canadian provinces also prevent businesses from imposing a gift-card expiry date, except in limited circumstances.

A 2012 report on gift cards by Australia’s Commonwealth Consumer Affairs Advisory Council concluded expiry dates and other terms were detrimental to consumers. But the report stopped short of putting a figure on the potential loss.

Instead, the council called on retailers to adopt minimum best-practice standards. It recommended:

  • expiry dates longer than 12 months, unless the retailer can justify a shorter term
  • grace periods
  • the expiry date (and other key terms) prominently displayed on the card
  • replacement of lost or stolen cards provided there’s proof of purchase and it’s possible to reissue the card
  • instore procedures that must be followed for customer service and complaints-handling.

The gift-card market here has yet to embrace these minimum standards, although some retailers are offering better terms than others.

Our view

  • Gift cards are a growing source of revenue for retailers. But consumers are being disadvantaged by unfair terms and conditions.
  • There’s no legitimate case for expiry dates on gift cards. Some retailers have already removed them. We think all should.
  • The ban on unfair contract terms included in the Consumer Law Reform Bill before Parliament may finally provide a way to challenge those who don’t.

Our advice

  • Buying a gift card? Ask what the expiry date is and whether there are any limits on the card’s use. Keep the receipt and include it with the gift-card. It may be needed later as proof of purchase.
  • You’ve been given a gift card? Use it as soon as possible. Ask the store for a grace period if you can’t use it before the expiry date.