Beware the rip-off inactivity fees wiping out your gift card

Anyone who received a gift card for Christmas should be aware the clock is ticking to spend the funds – or they could be eroded by ‘inactivity fees’. 

It is a common peril with prepaid currency cards, but customers are now being caught out by fees on inactive gift cards.

These monthly charges eat into unspent balances when a card goes unused for a long time – until the balance reaches zero.

This problem is of increasing significance as people shop less in lockdown.

‘Inactivity fees’: These monthly charges eat into unspent balances when a card goes unused

Before Christmas, The Mail on Sunday warned that gift cards should be spent quickly due to the threat of businesses going bust, at which point cards effectively become worthless.

Sir Philip Green’s Arcadia group collapsed into administration soon after, and shops such as Topshop and Dorothy Perkins only accepted gift cards for up to 50 per cent of an item’s purchase price.

But there is now a big surge in complaints about dormancy fees wiping out the value of cards.

Customers worry that the practice is both confusing and unfair. Gift cards sometimes come with a date stamped on the front which many assume is an expiry date. But it can be a ‘valid until’ date, needed for when a card is used to shop online – like with a debit or credit card.

Elizabeth Sommerville, 69, from North Lanarkshire in Scotland, was given three One4All gift cards as a birthday present. Such cards are popular as they are accepted at many retailers.

After noticing a 2021 date stamped on the front, Elizabeth was spurred into using them. But her cards were declined for lack of funds.

There is a big surge in complaints about dormancy fees wiping out the value of cards

Elizabeth says: ‘After a considerable amount of research, it was upsetting to discover the gift cards with a face value of £75 were now worth £35.20, even though the date on their fronts was 2021.’

This date, she discovered, was merely required to validate online purchases. The cards had shrunk in value due to a monthly ‘inactive balance’ charge per card of 90p. This had kicked in 18 months after the purchase of the cards.

Elizabeth admits she should have used the cards sooner, but a road accident had made it difficult for her to shop in person and she even struggled to use her computer for online purchases.

The Mail on Sunday contacted One4All about Elizabeth’s case. It agreed to refund the fees, with a £20 ‘goodwill’ gesture.

It said: ‘Customer satisfaction is our top priority and if the application of an inactive balance charge has caused any of our customers financial stress during this difficult time, we encourage them to contact our customer service team for assistance.’

It stresses that details of the charge are stated on the back of the card, the packaging and in the card’s terms and conditions available on its website. It added: ‘Our gift cards do not have expiry dates. The ‘valid thru’ date on the front of the card refers to the lifespan of the physical card and enables the user to shop online.’

However, consumer experts beg to differ. They argue that inactivity fees are an expiry date applied by stealth.

The issue of expiry dates on gift cards was raised in the House of Lords a year ago, when it was confirmed there were no plans for further legislation. 

At the time, Lord Duncan of Springbank, Parliamentary Under Secretary for the Department for Business, Energy and Industrial Strategy, said businesses were strongly encouraged to use expiry dates longer than two years. 

Elizabeth Sommerville was given three One4All gift cards as a birthday present but she discovered that the gift cards with a face value of £75 were now worth £35.20

For his part, Lord Foster of Bath admitted having lost money to inactivity fees. He only discovered the charge after finding out his One4All gift card balance had diminished from £40 to £25.60.

Some fees applied on gift cards are even more punitive. For example, Vanilla gift cards that are not used for six months incur a monthly inactivity fee of £2.

Martyn James, of online consumer complaints service Resolver, has heard from many people impacted by inactivity fees in recent weeks.

He says: ‘I have been horrified to discover a wave of complaints about inactivity fees from people who have only just discovered their gift card balances are being eroded.

‘Not only are these fees fundamentally unfair, they’re clearly not widely known and not made clear. It really is a case of card issuers taking money for nothing – and it should be stopped.’

The Gift Card and Voucher Association has produced a guide for consumers giving or receiving gift cards at gcva.co.uk. 

This post first appeared on Dailymail.co.uk