When you’re in a gift bind (like most of us get into around this time), Vanilla Visas and prepaid MasterCards can seem like the best option for those hard-to-buy-for friends and relatives. It basically gives them the freedom to get the gift they’ll definitely love, while alleviating the stress of trying to figure out what that gift is — what’s not to love?
Fees, that’s what.
Back in 2007, Canada and individual provinces passed legislation to forbid companies from putting expiration dates and most fees on gift cards. Under the new laws, most businesses are no longer allowed to charge activation fees or dormancy fees and mall gift card fees are not to exceed $1.50 for activation and can’t start charging dormancy fees until 15 months have passed (even then, those can’t be more than $2.50/mo). Frugal kids of the world rejoice! Right? Well…
The thing is, “prepaid cash cards” (which is what those Vanilla Visas and MasterCards are) aren’t actually gift cards.
What does that mean about the fees they’re allowed to charge? Basically, they can do whatever they want and it’s pretty much all in the fine print that none of us read. So that means they can apply crazy activation fees, start charging your card if you don’t use it within a certain number of months or just have it expire altogether.
Our advice: it’s boring and annoying, but read the fine print.
Before 2012, Vanilla PrePaid would charge a $2.50 service fee every month starting the seventh month after activation until the card balance reached zero. That little tidbit was at the very bottom of the fine print. The cards also had “valid thru” dates which meant they would expire and become unusable after that date.
Thankfully, some companies have gotten wise to the fact that customers get angry when they go to pay with a card they’ve been saving and it has $7.35 left on it because MasterCard has been siphoning $2.50 a month from the card for a year.
In 2012, Vanilla changed their policy so that cards don’t expire (they still have “valid thru” dates, but customers can request new cards indefinitely) and they eliminated the administrative fee. There is still an activation fee of up to $8.95 depending on card value, but at least your card isn’t rapidly decreasing in value less than a year after purchase.
So if you’re looking to buy card-like items for your family/friends/co-workers this holiday, either consider a “gift card” that’s covered under those government regulations or very carefully check the fine print of any prepaid card for any sneaky activity.