Sunday, December 5, 2010

Tis the Season...

Tis the Season indeed… not only to be jolly but instead to be watchful for the many financial traps that usually surface around the holidays. One of the biggest traps these days are prepaid giftcards as my daughter recently discovered when she received a well-meant giftcard for her birthday.

Marshall Bank N.A. issued a "Vanilla" Visa card with prepaid amounts of $25, $50 and $100. Unless you read the fine print, you may find out rather painfully that prepaid giftcards often come with horrific fees. 
Many of them have expiration dates so your money is not going to last forever.  Then there are those "service fees" which are of course nonsensical because there is no service for those cards. The Vanilla visa card charges $2.50 per month after 6 months from activation.

The most appalling fee however, is an activation fee of up to $4.95 for a $25 gift card.  That’s almost 20% right off the top which in my humble opinion is completely unethical. At the same time, the Federal Reserve came out with new rules for giftcards just this summer. The new rules are meant to provide protections for buying and using these giftcards. You can read up on those rules at the Federal Reserve's Website:

Granted, the Fed put restrictions on some of the many other fees these banks used to get away with. It still beats me though how a 20% activation fee can be tolerated.

My advice in all this:  Prepare a self-made gift, something of real inherent value and stay away from those ridiculous and impersonal money sucking gadgets called giftcards.  If your friends and relatives wonder what you might want for the holidays, ask them to contribute to your savings account or to invest in your career instead. That means less money for the retailers but more resources towards your career.
Happy Holidays!