PLEA gratefully acknowledges our primary core funder the Law Foundation of Saskatchewan for their continuing and generous support of our organization.
Sometimes, people choose to buy something without picking out a specific item. This most often happens when you want to buy a gift for someone, but you cannot decide what to get. When you do this, you are pre-paying for an item you have not received.
Canadians love to buy gifts cards. Roughly three quarters of all Canadians give and receive them yearly. However, there are drawbacks to the convenience of these cards. Some surveys even suggest that, although we love to give them, we hate receiving them!
Although people choose gift cards for added flexibility, they may in fact reduce your options. Many stores offer cash returns on items that have been bought but turned out not to be what the person wanted. However, gift cards are not generally refundable. This means the person you give it to will never be able to get a refund to spend elsewhere. As well, there is always the possibility of the retailer going out of business before the gift card can be used.
Another downside is that it can be difficult to redeem the full value of the card. This is because the person is not likely to find something for the exact amount on the card. They are then left with either having a small amount left on the card or putting in some of their own money to buy an item that is worth more than what is left. Surveys estimate that up to almost half the money placed on gift cards goes unspent.
On the upside, there are protections in place that prohibit expiry dates on gift cards. The funds on a gift card can only expire if the gift card was issued for free or for a charitable purpose. The physical card itself can expire, but the issuer must replace it for free if there is any value left on it.
Any activation, maintenance or usage fees must also be included in the purchase price of a gift card. Once a card is purchased, businesses can only collect fees to:
If a business is not complying with these rules, they can be reported to the Financial and Consumer Affairs Authority (FCAA).
The law uses the term “prepaid purchase card” for gift cards as well as other similar things like punch passes for the bus or the gym. A prepaid purchase card is any electronic card, written certificate or other similar thing with monetary value. It must be sold in exchange for the future purchase or delivery of goods or services. The same rules that apply to gift cards apply to any prepaid purchase card. Things like annual memberships, however, are not considered to be prepaid purchase cards. For more information, see the FCAA’s page on gift cards.
Prepaid credit cards allow you to make purchases or take cash from the card. These are issued by credit card companies like Visa or Mastercard. These are considered credit cards and have slightly different rules compared to prepaid purchase cards.
They can seem like the ideal gift for a person who is impossible to buy for. You can put money on the card and the person receiving the prepaid card uses it just like a credit card to make purchases. The attractive feature of these cards is their flexibility and being able to make online purchases. The unattractive feature of these cards is that the money you put on can be eaten up by various fees.
There is often an initial cost to buying the card called a membership fee. There may also be yearly costs for maintaining the membership and monthly administrative fees. There may be charges to put additional money on the card and even to check the balance on the card. Unlike gift cards, which by law cannot have an expiry date, these cards can expire. If they do expire, however, the issuer will either need to send you the remaining money or issue a new card.
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