Consumer Reports: Gift cards inconvenient, sometimes worthless

LOS ANGELES (KABC) -- Thinking about giving away gift cards this holiday season? Think again. Consumer Reports says they can be inconvenient to use and may even end up being worthless.

Nearly $1 billion worth of gift cards will go unspent this year. Although funds on gift cards don't expire within five years like they used to, they still don't make a great gift, Consumer Reports' Anthony Giorgianni said.

"One reason: fees. In the case of bankcards, fees can significantly chip away at their value," Giorgianni said.

Bank-issued cards with the Visa, Mastercard or American Express logo commonly have purchase fees that can run up to $5. If a card is lost or stolen, the replacement fee for a bankcard can be around $15.

Then there are dormancy fees that kick in after a year or so, like TD Bank's $2.50 a month. Ten months of that and a $25 card is worthless.

"Cards issued by merchants typically don't have fees like bank cards. But we ding them on convenience, since you can use them only at the business on the card," Giorgianni said.

If a store card is lost or stolen, merchants aren't required to replace them. Consumer Reports found some who don't.

Another drawback is that customers have no legal right to dispute charges made on them like they can with credit or debit cards.

Consumer Reports recommends spending gift cards as soon as possible and giving cash or checks instead.