Bank Gift Cards Come Wrapped With Limits

In other words, it is up to a gift-card user to know the exact balance -- down to the penny. That is not always easy, especially if has been a long time since the card was used. Some companies charge a monthly $2.50 fee on cards that have not been used for several months, so the amount may be further reduced.

Alexandra Langley, a part-time sales associate at a local clothing store, said she once had a customer who discovered these fees had eaten up 50 percent of the balance by the time he tried to use it.

The card companies permit consumers to check balances online, but "if the customer is in the store, they can't just run home and check the balance on their computer," Langley said. Some cards offer a toll-free telephone number for balance inquiries, but that often takes too much time at checkout. Besides, there is sometimes a fee for telephone inquiries, Langley said.

Visa spokeswoman Rhonda Bentz said the company was unaware of the problem of split transactions until The Washington Post raised the issue. "Now we'll be looking into it," Bentz said.

MasterCard and American Express officials said they have been slowly rolling out new technology to make it easier for merchants and gift card users to know a card's balance so it can be used with cash or another credit card to buy something for more than the card's value.

"It is still going to take some time" to have the technology widely in place, said Scott Galit, MasterCard's senior vice president for global prepaid cards. In the meantime, Galit said, "you do need to know the balance."

Rising complaints about gift cards, particularly their fees, prompted two key congressmen in December to ask the Federal Trade Commission to look into the marketing, sale and use of gift cards. Though there is no charge beyond the face value for most store gift cards, bank cards usually carry a purchase cost of several dollars.

The split purchase issue "is just the newest wrinkle," said Rep. Charles Bass (R-N.H.), who sought the FTC probe along with Rep. Joe Barton (R-Tex.), the chairman of the House Energy and Commerce Committee.

Bass said gift cards appear to be "a marketing tool where there is no natural mechanism for accountability." He added: "The person who buys the card is not responsible for its value when it's redeemed, and the person who receives the card doesn't have any incentive to complain, because it would be embarrassing if they didn't use it for a year and it became valueless. The potential for abuse is almost limitless."

Peggy Twohig, the FTC's assistant director for financial practices, said the agency is concerned that gift cards are being marketed with inadequate disclosures. "Consumers need to know what, if any, significant restrictions there are in using the cards -- fees, expiration dates other limitations of use," Twohig said.

The FTC findings are due today. Bass said future hearings are probable. "We have to come up with a series of consumer protections which protect the consumers, which in this case is not the purchaser," he said.

Credit card issuers include terms and conditions on their Web sites and in the fine print that comes with the cards. But conditions vary from card to card, making their use challenging, said Evan Johnson, an administrator in the Montgomery County consumer affairs office, which annually surveys gift cards and fees.

For instance, American Express and Visa direct users who want to make a purchase greater than the card's value to tell the store clerk, then pay first with cash or a credit card to bring the remaining total to the exact amount on the gift card. Discover directs users to do the opposite.

There are extra conditions for using the cards at restaurants and gas stations. Restaurants may automatically add 20 percent to the cost of a meal when they submit the card for approval. So, a $50 meal might be submitted as $60 -- enough to cause a $50 gift card to be rejected -- unless diners say in advance that they intend to tip with cash.

Many gas stations seek large preauthorization amounts -- typically $50 to $75 -- before permitting customers to pump. That amount is put on hold until the station forwards the purchase's actual cost to the issuer, a process that could tie up a card's funds for three to seven days.

"Bank gift cards sell the convenience of being able to use them at many sellers. Many consumers are willing to put up with their fees to gain that convenience," Johnson said. "The problem of using them for purchases greater than the card's balance is their dark secret. It means they can often be very inconvenient. And without convenience, they have very little going for them."