Advertiser Disclosure

NerdWallet Study: Neither Store-Issued Nor Bank-Issued Cards are Guaranteed Free or Safe This Holiday Season

Nov. 26, 2012
Credit Cards
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own.

A NerdWallet study of the most popular bank and store gift cards found that 100% of bank cards charged purchase fees, while nearly 20% of store gift cards do not refund the balance if lost or stolen – a significant drawback, given that the cards’ primary value lies in security and inexpensiveness.

If you’re not one to stalk the aisles, hoping to find the perfect present, gift cards are a popular alternative: They’re more festive and safer than cash, and they’re perfect for someone who likes to shop on their own. Conventional wisdom holds that store-issued gift cards – which can only be used at a specific retailer – are low-fee and easily replaceable, while bank-issued gift cards – which can be used anywhere – have slightly higher fees but are more versatile. But not all gift cards are fee-free or even replaceable, as NerdWallet found.

Store gift cards, bank gift cards and prepaid debit cards: A primer

Store Gift Cards Bank Gift Cards Prepaid Debit Cards
Purchase for free Most No Some
Access to Cash No No Yes
Replace if Lost or Stolen Most All; most charge a fee All; most charge a fee

NerdWallet analyzed the 17 most popular store gift cards, 9 bank-issued gift cards and 70 prepaid debit cards and plans and found that:

Store gift cards are no guarantee if lost or stolen.

  1. 18% of store gift cards would not replace the funds if lost or stolen. Still more required that proof of purchase (registration or receipt) be shown to receive a refund.
  2. Store cards are not necessarily free if purchased online: While some had free-shipping offers, 29% charged a shipping fee for physical gift cards.

Bank cards may provide security, but charge a premium for it.

  1. 100% of surveyed bank-issued cards charged a purchase fee.
  2. A full 67% of bank-issued cards charged an inactivity fee, beginning after 12 months.
  3. All would replace the card if lost or stolen, but 33% would levy a fee, averaging just over $3.

Poorly chosen prepaid debit cards are worst of all.

  1. 82% of prepaid cards charged an activation or monthly fee, averaging $8.29 and $6.26 respectively.
  2. 61% charged a replacement card fee, averaging $7.92.
  3. Perhaps most troubling, 31% charged for every PIN transaction made.

Well-chosen prepaid debit cards offer the best of both worlds.

  1. Certain prepaid debit cards had no monthly, purchase or replacement fees, making them more versatile than store credit cards and more affordable than bank-issued ones.
    • The American Express Bluebird’s only fees are a $5 in-store purchase fee (no shipping fee if purchased online) and a $2 ATM fee if the cardholder does not use direct deposit.
    • With the lack of fees, versatility and security, it has better features and is less expensive than gift cards.

Percent of Cards Charging Fees

Store Gift Cards Bank Gift Cards Prepaid Debit Cards
Purchase/Shipping Fee 29% 100% 47%
Monthly Fee 0% 0% 76%
Inactivity Fee 0% 67% 26%
Replacement Card Fee 0%(only 82% offer to replace at all) 33% 61%
ATM Withdrawal N/A N/A 83%
Per-Transaction Fee 0% 0% 31%

Average Fees

Store Gift Cards Bank Gift Cards Prepaid Debit Cards
Purchase Fee $2.75 $4.57 $8.29
Monthly Fee $0.00 $0.00 $6.26
Inactivity Fee $0.00 $2.83/mo $3.52/mo
Replacement Card Fee $0.00 $9.17 $7.92
Access to Cash N/A N/A $2.04
Per-Transaction Fee $0.00 $0.00 $1.04

*Excludes $0 values.

Gift Card Tips

Here are a few essential tips when considering a buying a gift card this holiday season:

The American Express Bluebird is a low-fee, safe option, but requires registration with a Social Security number.

Store-branded gift cards don’t have inactivity fees unless there is no activity for 12 months or more, per the CARD Act of 2009.

Don’t buy a store gift card if they charge you shipping fees. Instead, send an e-gift card. If you’re set on giving a physical gift card from that store, you might as well get a bank-issued one, which will provide greater versatility.

Make sure the store card will replace if lost or stolen. Also be sure to register the card (if applicable) and to keep a receipt as proof of purchase.

Bank-issued gift cards will probably cost you, from mandatory fees like purchase and shipping to incidentals like replacement or inactivity charges.

Avoid flashy prepaid debit cards. Cards that tout celebrity endorsements, such as the Twilight or Russell Simmons RushCard, often come laden with purchase, monthly, and even per-transaction fees. If you decide to get a prepaid debit card as a gift, look carefully at the fee schedule – what you see may surprise you.

Beware of bank card acceptance. If you choose to get a bank gift card, be aware that some networks aren’t as widely accepted as others. American Express and Discover gift cards may carry the least fees, but since they aren’t as widely accepted as Visa or MasterCard, you’re more likely to get stopped at the register.