Gift card laws in the United States start with a federal floor: under the Credit CARD Act of 2009, most gift cards must stay valid for at least five years, and issuers cannot charge inactivity or service fees during the first twelve months a card goes unused. Many states add stronger protections on top, and the rules that apply to a particular card also depend on whether it is a store-specific card or a network-branded one. Here is what those rights look like in practice, and where the gaps are.
The Five-Year Expiration Floor
A gift card cannot expire sooner than five years from the date it was issued or the date funds were last loaded onto it, whichever is later. If the card carries an expiration date, that date and the related terms must be printed clearly on the card itself. For electronic gift cards delivered by email or text, the same disclosures must appear on the digital card or code you receive.
If funds remain on the card when it expires, the issuer has to replace the card at no cost when you ask. Several states go further than the federal rule and prohibit expiration dates entirely on cards that hold only monetary value, so in those states the five-year rule is a backstop rather than the standard.
What Issuers Can Charge
Inactivity and Service Fees
No issuer can charge a dormancy, inactivity, or service fee unless the card has gone completely unused for at least twelve consecutive months. Even after that waiting period, only one such fee per month is allowed. Every fee term, including the amount, how often it applies, and the conditions that trigger it, must be clearly disclosed on the card before purchase, and the buyer must be told about the fees at the point of sale.
Roughly sixteen states ban inactivity fees on gift cards outright. If you bought your card in one of those states, or the card was issued there, the twelve-month federal window never comes into play.
Purchase and Activation Fees
Activation and purchase fees are separate from inactivity charges and show up most often on open-loop cards branded with Visa, Mastercard, or American Express. Federal law does not ban these upfront fees. It does require full disclosure before you buy: the type of fee, the exact amount or the formula used to calculate it, and the conditions under which it applies. Once the purchase is complete, the issuer cannot change those terms.
Open-Loop vs. Closed-Loop Cards
Gift cards fall into two categories, and the category determines what protections you have beyond the CARD Act. Closed-loop cards work only at a specific retailer or a group of affiliated stores. Open-loop cards carry a payment network brand like Visa or Mastercard and work anywhere that network is accepted.
Open-loop cards issued by financial institutions are also covered by Regulation E, the federal rule for electronic fund transfers. That gives open-loop holders protections closed-loop users do not get. If you report a lost or stolen open-loop card within two business days, your liability for unauthorized charges is capped at $50. Report after two business days but before your next periodic statement, and the cap rises to $500. Wait longer than sixty days after a statement showing unauthorized activity, and there is no cap on transfers made after that sixty-day window. Regulation E also requires the issuer to investigate reported errors within sixty days of your statement.
Closed-loop retailer gift cards have none of these safeguards. If someone steals your Starbucks or Target card and drains the balance, federal law does not require the retailer to make you whole. Some retailers will voluntarily replace a stolen card if you can produce the original receipt and card number, but that is a courtesy, not a legal obligation. Registering the card online when you receive it improves your odds of recovery.
Cards the CARD Act Does Not Cover
Several categories of prepaid products fall outside the five-year expiration rule and fee restrictions. If your card is one of these, you should not assume the protections above apply:
- Reloadable prepaid cards that are not marketed or labeled as gift cards, even if someone gives one as a gift.
- Loyalty, award, and promotional cards, including rewards, incentives, and rebates. These can expire sooner than five years and carry fees the CARD Act would otherwise limit.
- Phone cards used solely for telephone services.
- Cards redeemable only for admission to an event or venue, including food and merchandise sold at that venue.
- Paper-only gift certificates.
- Cards not sold to the general public, such as employee incentive cards.
Loyalty and promotional cards still carry disclosure obligations. The expiration date for the underlying funds must be printed on the front of the card, and any fees must be stated on the card or device.
Cash Back on Small Balances
About ten states require retailers to redeem a gift card’s remaining balance in cash once it drops below a set threshold. Those thresholds run from under a dollar to just under ten dollars, with most sitting around five dollars. In the rest of the country, there is no cash-back requirement, and a small leftover balance can be effectively unusable. One workaround: many online retailers let you split payment across a gift card and another method, so you can spend down a tiny balance on a larger purchase.
When a Retailer Goes Bankrupt
Gift card holders are unsecured creditors in a retailer bankruptcy, which puts them behind banks and other secured lenders in line for repayment. What happens to the card depends on the type of filing.
In a Chapter 7 liquidation, the business shuts down. Cards for that retailer are effectively worthless unless you file a proof of claim with the bankruptcy court, and even then full repayment to unsecured creditors is rare. In a Chapter 11 reorganization, the goal is to keep the business running, so many retailers ask the bankruptcy court for permission to keep honoring gift cards during the case. It isn’t automatic. The company has to request it and the court has to approve it, sometimes with restrictions like a redemption window or a cap on the value honored per transaction.
The practical response: spend cards promptly. If you hear a retailer is in trouble, use the balance before any petition is filed. Once the case is underway, redemption depends on the court and the reorganization plan.
Gift Card Scams
Consumers reported $212 million in losses in 2024 where gift cards or reload cards were the payment method used in fraud. Scammers favor gift cards because the transactions are fast, anonymous, and nearly impossible to reverse.
The core rule is simple. No legitimate business or government agency will ever ask you to pay with a gift card. Not the IRS, not the Social Security Administration, not your utility company, not a court. If someone tells you to buy gift cards and read them the numbers off the back, it is a scam.
Common versions include callers claiming you owe back taxes, fake tech support alerts demanding payment to fix your computer, messages from someone pretending to be a friend or family member in an emergency, and romance scammers building trust before asking for gift card funds. Scammers often stay on the line while you drive to the store and load the card, using urgency to keep you from thinking or checking with someone you trust.
If you have already shared the numbers, contact the gift card company right away. Some issuers can freeze the remaining balance before the scammer drains it. Then report the fraud at ReportFraud.ftc.gov.
Unclaimed Balances and State Escheatment
When a gift card sits unused long enough, the balance may become “unclaimed property” under state law. Most states require businesses to turn over dormant gift card funds to the state treasury after a set period, typically three to five years of inactivity, though the timeline varies. Some states exempt certain gift cards from escheatment entirely, particularly closed-loop cards with no expiration date.
If your balance has been turned over to the state, the money is not gone. Every state runs an unclaimed property program where you can search by name and file a claim, usually free and online through the state treasurer’s or comptroller’s office. There is no filing deadline in most states, though a few do impose a final cutoff years after escheatment.
Habits That Protect Your Balance
Most gift card losses come from forgetting the card exists, falling for a scam, or acting too late when a retailer shows signs of trouble. A few habits reduce the risk:
- Use cards soon after you receive them. Sitting in a drawer is where cards lose value to fees, escheatment, or bankruptcy.
- Photograph the front and back of every card, and save the receipt. That documentation is your only leverage if the card is lost or stolen.
- Register the card if the issuer offers registration. Linking your name to the balance makes recovery easier.
- Check the balance from time to time. Federal law requires issuers to provide a way to check, usually a toll-free number or website printed on the card.
- Never pay anyone with a gift card. If someone asks for gift card numbers as payment, it is a scam.