Word: cards
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After Arlene Vinson's favorite boutique in her hometown of Brea, Calif., went out of business a few years ago, her husband Norman--perplexed about what to give her for Christmas--decided that about 20 of the $50 bank-issued gift cards sold at their neighborhood mall would be the ideal gift; she could redeem them at any store in the shopping center. But nearly six months later, when Arlene tried to buy a $20.50 blouse with $2.50 in cash plus a gift card with $18 of unspent credit, the sales clerk said it couldn't be done, citing...
...proliferation of gift cards has already sparked an outcry from consumer groups concerned about their lack of regulation. In the mid-1990s a few big specialty retailers and major department stores began issuing cards with magnetic strips and a preset or unlimited value as cheaper, more secure alternatives to paper gift certificates, which are easy to counterfeit. Card sales grew between 15% and 35% annually from 1997 to 2004, and while the issuing stores waited for the redemptions, they locked in enormous future revenues and racked up hefty interest income. Until now, regulators have trod lightly because they recognized...
...sorts of businesses quickly realized that the cards were cash cows. Now banks, credit-card companies, various financial-services providers and such chains as Starbucks sell branded prepaid cardsnot only at their own outlets but also through grocery stores and shopping malls as well as over the Internet. The newly reopened toy store F.A.O. Schwarz is even offering a $100,000 gift card. Some of the cards include ATM access. Some let holders reload them; others permit transfer of funds to other cards or individuals. In one of the latest incarnations, at last count about 1,000 companies give their...
...that the market is robust, the government is considering requiring issuers of payroll cards and certain other prepaid cards to insure the underlying accounts, and the Federal Reserve is proposing that they also reimburse holders of payroll cards for unauthorized uses under the same terms as those for bank debit cards. Many card issuers are building consumer protections into their products on their own. Safeway stores, for example, don't sell cards with expiration dates or dormancy fees...
Unwilling to rely on the goodwill of issuers, consumer advocates have begun pushing for bans on expiration dates and user fees for all the products, plus replacement if the cards are lost or stolen as well as clear avenues to get cash for unspent funds. "Until Congress acts, there's very little protection for users of bank- issued cards," says Gail Hillebrand, an attorney with Consumers Union. "If you receive a gift card, make sure you know what you're getting into...