Michael Conroy / AP

Despite their popularity, gift cards are not the same as cash.

Chances are you gave or received at least one gift card for Christmas or Hanukkah. Once again this year, these cards were the most requested holiday present.

Despite their popularity, gift cards are not the same as cash. They can expire after five years (unless prohibited by state law) and there may be dormancy fees for not using them.

Sen. Richard Blumenthal (D-Conn.) wants to ban inactivity and service fees, and prohibit expiration dates on all gift cards and gift certificates. His Gift Card Consumer Protection Act would do that and much more.

“This bill bars absolutely draconian deadlines and abusive fees and charges that unfairly confiscate consumer gift card cash,” Sen. Blumenthal said in a statement. “Gift card companies fatten their profits and shrink consumer wallets with exploitative expiration dates and petty, underhanded junk fees. Gift cards should not be the gift that keeps on taking. This measure assures that consumers get their money's worth, no matter when they use the gift card.”

The Gift Card Consumer Protection Act would also prevent loyalty, promotion and awards cards from expiring. These are the type of gift cards you get as a bonus for buying a product or redeeming credit card points. Many of these cards expire in as little as 30 days.

The bill would also reduce the chances that you’ll get stuck with a worthless gift card. It would require a company that files for bankruptcy to honor its unredeemed gift cards and prevent that retailer from selling any more of them while under bankruptcy protection.

Sen. Blumenthal’s office reminds us that when Sharper Image filed for bankruptcy in 2008, the electronic gadgets store stopped accepting its own gift cards.

“We think this bill is a welcome present for anyone who’s been short-changed by a gift card,” said David Butler with Consumers Union, the advocacy arm of Consumer Reports. “We believe you ought to receive the full value of your gift card. You should be able to use it when you want it without any concern that the card has expired or that it’s no longer accepted.”

Companies that issue gift cards generally oppose the bill. The Network Branded Prepaid Card Association calls the proposed ban on expiration dates and service fees “unworkable restrictions” that could change the market for these cards.

“Consumers would likely lose access to many gift and promotional cards if all fees are prohibited – even after 12 months of inactivity – because the card programs would likely be discontinued as uneconomical for program providers,” said NBPCA president Kirsten Trusko in a statement to NBC News.

While inactivity fees provide profit, Trusko said they also pay for things such as customer service, protection against lost or stolen cards and fraud protection. Expiration dates are needed on promotional gift cards, she insisted, because like coupons they encourage consumers to visit a store or restaurant during a specific sales period.

“Forcing promotional cards to have no expiration date would undermine the usefulness of such cards for promotional purposes,” she wrote.

The American Bankers Association (ABA) hasn’t officially opposed Sen. Blumenthal’s bill. Instead, it questions the need for more government regulation in this area.

“The law is not necessary,” said ABA spokesperson Nessa Feddis. “We don’t know what it would do.”

Feddis wants everyone to know that a gift card never really expires, even when there is an expiration date on the card.

“The funds can’t expire, only the card,” she said. “All the customer has to do is call the company to get a new card issued.”

Feddis also emphasized that the companies that issue these cards don’t get to keep the money if they’re not used. After a certain period of time, normally seven years, any unused funds go to state’s unclaimed property office.

What to do with unwanted gift cards
Plastic Jungle, a company that buys and sells unused gift cards, estimates that the typical American household has unused gift cards worth an average of $300. That’s billions of dollars sitting in purses, wallets and dresser drawers.

Don’t let this money go to waste. If you don’t plan to use the card for yourself, use it to buy a present for someone else, donate it to a charity or turn that card into cash.

Sites such as Gift Card Granny, Gift Card Rescue, CardPool and Card Cash  buy and sell gift cards.

“If you received a gift card to a store you don’t like or a restaurant that you don’t go to, the card is essentially useless to you,” said Kendal Perez with GiftCardGranny.com. “So being able to exchange it for cash gives you the ability to get something out of that card.”

For a popular store, such as Target, Amazon or Wal-Mart, Kendall said they pay 90 percent or more of the card’s value. For other merchants, expect 70 to 85 percent.

TIP: Shop around if you want to get the most for that unwanted gift card. Offers can vary greatly from site to site.

Eliminating gift card 'gotchas'
Gift cards are big business. The TowerGroup expects total sales for the year to hit $110 billion. As the market for gift cards has grown, so has the need for improved regulation.

The Credit CARD ACT of 2009 prevents gift cards from expiring for at least five years. That’s good, but more should be done to eliminate the remaining gift card “gotchas.”

The Gift Card Consumer Protection Act makes sure you won’t be shortchanged when you give or receive one of these cards.  

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website. 

Courtesy Starbucks

Starbucks's $450 gift card made of metal will go on sale this Friday at noon eastern. If you notice your stocking drooping a bit more than usual on its hook this year, perhaps it's holding one of these 20 gram cards made of etched stainless steel and available in a limited run of 5,000 through the luxury shopping site Gilt.com. Existing Starbucks cardholders will get first dibs at noon ET on Thursday.

The card is loaded with $400 worth of coffee purchasing value. It costs more than $50 to make each one, Starbucks senior manager of global brand PR Linda Mills told TODAY. The cards also grant the bearer instant Starbucks Rewards™ Gold Level, which lets them earn free food and drink after making 12 purchases. Usually a card holder would have to make 30 purchases in 12 months to gain that status.

The gift card offering comes on the heels of a $7 large "Costa Rica Finca Palmilera" coffee that Starbucks is selling in only 48 stores, nearly all in Seattle and Portland. Large regular brews normally go for $2.20.

While the market play of a luxe offering in a recessionary time can seem counterintuitive, or snobbish, it might actually be pretty smart. Usually in hard times, it's the sale of cheap creature comforts and vices that survive, like candy, cigarettes, and yes, coffee, along with the super-high end markets.

If you buy your daily $1.50 tall drip, you will be set for 266 days.

I also harbor a serious love for good design and like the idea of turning the humble gift card, a flimsy mechanism of semi-virtual money, into a coveted object of substance. Having such a hefty reminder in your wallet could also be a way to make sure this card, unlike most gift cards that die in desk drawers and the bottom recesses of purses, actually gets used.

Related story:

• Starbucks plans 3,000 new shops in the Americas

Pat Wellenbach / AP file

Gift cards are very popular, but consumers should be aware that some of them come with strings attached in the form of steep fees.

Tony Giorgianni admits to being old-fashioned. An associate editor at Consumer Reports, he can’t understand why gift cards are so popular.  

“If you can’t figure out what to give, why not give cash and let the person use the cash any way they want?” he asked. “To me, a gift card is the same as giving cash with restrictions on it.”

He has a point. Cash never expires, it can be used anywhere and you don’t have to worry about the store going out of business.

Even so, gift cards are more popular than ever. According to the National Retail Federation’s 2012 Holiday Consumer Spending Survey, gift cards top this year’s wish list.

Six in 10 shoppers polled (59.8 percent) said they’d like to receive a gift card. That’s up two points from last year, and it's the highest figure ever for this survey.  By comparison, 49 percent want clothing and 46 percent would like books, CDs, DVDs, videos or video games.

Target believes holiday shoppers want gift cards. Earlier this month, the giant retailer introduced the hi-tech WOW!  holiday gift cards with lights, music and motion.

The snowman card plays “Joy to the World,” the Christmas bear has a light-up sweater and the reindeer-shaped card uses a magnetic stylus to navigate the antler maze.

Some gift cards are a better deal than others

Expiration dates used to be a big problem. Not anymore. Federal rules now require all gift cards to be good for at least five years from the date of purchase. Some states, including California, Connecticut, Florida, Minnesota and Washington, prohibit the sale of retail gift cards that expire. (See a list of state gift card laws.)

Fees are now the big “gotcha,” especially for gift cards issued by banks and credit card companies.

For its just-released 2012 Gift Card Survey, Bankrate.com surveyed 55 popular store gift cards and eight general-purpose gift cards. All of the cards issued by the banks and credit card companies charged a purchase fee — ranging from $2.95 to $6.95 — while only 9 percent of the store-branded cards did.

“To get the most value you want to go with a store-branded gift card as opposed to a general-purpose gift card that has the Visa, MasterCard or American Express logo on them,” said Janna Herron, a credit card analyst at Bankrate. “The benefit of these general-purpose cards is that you can use them anywhere, but because of the fees, you’d be better off giving cash.”

One more thing to watch out for: dormancy fees. Federal rules allow an inactivity fee to be charged after 12 months. Only 2 percent of the store gift cards in the Bankrate survey have a dormancy or maintenance fee. Seventy-five percent of the general-purpose cards do. They charge as much as $3 a month — if the card is not used for 12 months or more.

What if the card is lost or stolen?

“The biggest risk you have with a gift card is that you lose them or don’t use them,” said Gerri Detweiler, personal finance expert at credit.com. “Always register the card, because if it’s lost, it’s like you lost cash.”

Remember: A gift card, even one with a bank or credit card logo on it, is not a credit card. Each issuer decides what to do if the card is lost or stolen. Bankrate found that about two-thirds of the cards offer loss/theft protection.

Consumer Reports advises giving the purchase receipt along with the gift card because that proof-of-purchase may be required if the card disappears.

Spend less, get more

There’s no reason to pay full price for a gift card. Costco sells a variety of restaurant gift cards for 20 percent off the face value.

You can also find deals at websites that buy and resell gift cards, such as Plastic Jungle, Gift Card Granny, Card Hub, Cardpool, CardCash, GiftCards.com or Gift Card Castle. These cards are for well-known retailers, from Ann Taylor to Zappos.com. 

“The average discount is about 10 to 15 percent, but they can go up to 35 percent depending on the merchant,” said Elliott Klier, founder of CardCash.com. 

Using one of these established sites is much safer than buying from an auction site or Craigslist. They guarantee the card is loaded with the value listed. And there’s no shipping charge.

Savvy shoppers visit these sites to buy discounted gift cards to use themselves. It’s a simple way to stretch that holiday shopping budget. Basically, you’re buying cash at a discount. Gift cards can be combined with coupons or special offers. They can also be used on Black Friday.

If you get a gift card you don’t want, you can use these same sites to turn that card into cash. They normally pay about 90 cents on a dollar.

More info:

• FTC: Buying, using and giving gift cards
• Consumer Reports: 4 reasons to Use those gift cards now

Herb Weisbaum is The ConsumerMan. Follow him on Facebook or visit The ConsumerMan website.

Gift cards are the most-wanted holiday gift again this year – ahead of jewelry, clothing and even electronic gadgets. According to the National Retail Federation’s 2011 holiday survey, eight out of ten holiday shoppers plan to buy gift cards. They will spend an average of $155 on them. 

Let me share a little secret. You don’t have to pay full price for gift cards. You can get them from resellers and save anywhere from 8 percent to 35 percent.  These cards are for well-known retailers, from Abercrombie & Fitch to Zappos.com. 

“You give someone a $50 gift card and they think you’ve spent $50, when in reality you only spent maybe $40 to buy it,” says Odysseas Papadimitriou, CEO of Card Hub.com. 

To do that, you need to have the card sent to you and then you give it to the person on your list. Most gift card resellers do not charge for shipping. 

What if the card is scratched and doesn’t look new?
“Go to the store where the card is sold and ask them to give you a new card with the same value,” Papadimitriou advises. “That way you get brand new plastic to give to your friend or family member who will have absolutely no clue.” 

What if the card is loaded with an odd amount?
That’s often the case at these resale sites. I just went online and found a Coldwater Creek card for $139.41 on sale for $118.50. That’s 15 percent off. But you’d never give someone a gift card loaded with a crazy amount like that. It’s a dead give-away that you bought the card from a reseller. 

Again, there’s a way around that. You can go to the store and ask them to split the card.  For example, you could get two $50 cards and have the rest ($18.50) put on a third card you can use.  Or you could pay an extra $1.50 and make the last card worth $20. 

Buy discounted gift cards for your holiday shopping
Many savvy shoppers now buy discounted gift cards to use, rather than to give away. It’s like cashing-in on an instant sale. 

“I buy the gift cards for myself,” says Kristin Morse, vice president of marketing at Plastic Jungle.com, one of the big gift card resellers. “So I save money before I even go into the store.” 

Morse says she likes to stack her savings, using the discounted gift card to buy things that are on sale. If there’s a coupon, that’s even better. 

"It adds up to where you can really stretch your dollars,” she says. 

Morse tells me about 80 percent of their customers buy gift cards to use for themselves. She says that extra little bit of savings lets them get what they really want.

If you decide to use the resale market, be sure to deal with an established website, such as Plastic Jungle, Gift Card Granny, Card Hub, Cardpool, GiftCards.com or Gift Card Castle. Always pay with a credit card, not a debit card. That gives you extra fraud protection should there be a problem. 

The ultimate in convenience
The 2011 Gift Card Survey by Bankrate.com found a significant rise in the availability of e-gift cards that are emailed to the recipient.

Starbucks, Best Buy, Gap, Pizza Hut, Staples, Overstock.com and American Express all added a virtual version of their gift cards in the last 12 months. Amazon lets you send gift cards via Facebook. 

“It appeals to the last minute shopper, maybe someone who got a gift they didn’t expect and they want to respond to it,” says Bankrate’s Janna Herron. 

Some electronic gift cards are printable (like e-tickets); others are simply a promotional code the recipient uses when shopping. 

“E-gift cards still make up a small percentage of overall gift card sales, but that segment is growing,” Herron says. 

Because an e-gift card could be confused with spam, it’s a good idea to contact recipients to let them know what you did. You might even want to follow-up to make sure they got it.

Know the rules
Gift cards are much more consumer-friendly because of federal rules that took effect last year. According to the Federal Trade Commission:  

• Money on a gift card cannot expire for at least five years from the date the card was issued or money was loaded onto the card.
• Inactivity fees cannot be charged until the card has not been used for at least one year. You can be charged a fee to buy the card or to replace a lost or stolen card.
• The expiration date of a card must be clearly disclosed on the card, and fees must be clearly disclosed on the card or its packaging. 

More info:

Federal Trade Commission: Buying, Giving, and Using Gift Cards