What are gift card 'activation fees' and how do you make sure to spend your vouchers?

Once considered an impersonal or lazy present, gift cards are more popular than ever, with millions exchanged last Christmas.

Financial comparison website Ratecity research director Sally Tindall used to hate the idea of gift cards.

"It was a present where the person wasn't thinking really long and hard about what the recipient might buy," Ms Tindall says.

Now she appreciates it gives the recipient a choice and it takes the pressure off the buyer.

But consumer advocates say it's still important to put some thought into the purchase.

Here are some things buyers should watch out for and tips for recipients to make sure they use up their gift cards.

Avoid extra fees

The vast majority of gift cards do not charge any fees. In fact, law reforms in 2019 banned post-purchase fees.

But some products that are marketed as gift vouchers, such as preloaded Visa and Mastercard cards, add fees of about $5 at the checkout.

Gerard Brody, chair of the Consumer Federation of Australia told ABC Radio Sydney a loophole means these cards are considered financial products and not subject to the same rules.

However, he said the fees still needed to be "fair and transparent" and he urged the government to consider closing the loophole.

"Back in 2019 the government said that one of the reasons for this loophole was that these prepaid cards weren't commonly used as gift cards. What's changed now is they are commonly used as gift cards," he told Breakfast presenter Craig Reucassel.

On the plus side, Ms Tindall says those cards can be spent anywhere and give the recipient maximum choice. 

"It's a lot easier to get your balance down to zero," she says. 

Some online gift card retailers also add a credit card and processing fee that can end up being nearly 10 per cent of the gift card amount. Ms Tindall advises buyers to take a couple of minutes to read the fine print.

"If you're about to hit 'buy now' on a gift card, just spend two minutes to understand what the fees are, and what the requirements might be, in terms of when the recipient goes to redeem that gift card to make sure you're making the right choice."

Restrictions

Check any restrictions that might make it harder for the recipient to use their gift card.

For example, you can buy a digital Coles or Kmart voucher but the retailers don't allow the recipient to spend it online.

If the recipient can't use the gift card online, try to choose a place that has a physical location close to their home, work or somewhere they visit often, to make it easier for them to spend it.

What if it's expired? 

Thankfully, those 2019 law reforms also extended the minimum expiry date on gift cards to three years.

Mr Brody says there are a few exceptions, such as if it's tied to a particular promotion or product with a limited production time.

And if you're doing a spring clean and find an old gift card under the bed, it's always worth asking the store if they'll honour it.

ABC Radio Sydney listener Paul Nothman from Bondi had a nursery voucher that expired at the end of December. Initially his calls and emails went unanswered.

But when he followed up again last week, he got through to the store manager and was granted a six-month extension.

"I felt vindicated, finally my approaches have paid off," Paul says.  

Mr Brody argues expiry dates should be scrapped entirely.

"I mean, it is a windfall gain to a business if a gift card expires if the money has been spent, but it doesn't have to deliver any product.

"So I think it is worth pushing it, and many businesses will, I think, extend that date because they want to keep your custom."

Don't lose them

Finder estimates there is nearly $2 billion worth of unused gift cards lying around Australian households after its survey of 1,086 people found two in five had unused vouchers.

If you don't want to add to this tally, Ms Tindall recommends: "First thing is keep it in a safe place, wherever it is, because if you lose it, that money is gone."

Digital gift cards make this easier, but try creating a vouchers folder in your email so they're not lost amongst the spam.

ABC Radio Sydney listeners also suggested setting monthly reminders to spend them in your calendar, especially if it's getting close to the expiry date.

What if you only have $10 or less left to spend?

Most stores will not give you cash for the remainder of your voucher.

So if the item you choose is less than the value of the gift card, but you've only got a small amount left, what do you do?

You could hang onto it for next time if it's likely you'll return to buy something. 

But if that's not likely, Ms Tindall has a lovely suggestion that prevents it being wasted and spreads a bit of love at the same time.

"Think about giving it to the person behind you in the queue ... because you know that they're about to buy something as well."