Gift card laws — what federal and state rules actually say

Federal baseline: the Credit CARD Act of 2009

The Credit CARD Act of 2009 (Public Law 111-24) established three federal minimums that apply to gift cards sold to consumers. Before this law, issuers could expire balances whenever they chose and charge whatever fees they wanted.

1. Gift card funds cannot expire for at least five years from the purchase date, or from the date funds were last loaded onto the card.
2. Inactivity fees are prohibited for the first 12 months of non-use.
3. If an inactivity fee applies after 12 months, only one fee per month is allowed, and the fee must be clearly disclosed at the point of sale.

These rules cover retail gift cards and general-purpose prepaid cards. They do not apply to cards issued for loyalty programs, promotional purposes, or cards given as awards or prizes where no money changed hands.

Closed-loop vs. open-loop cards

Closed-loop cards — usable at a single retailer like Target, Starbucks, or Amazon — typically carry no expiration date at all and no inactivity fees. Most major retailers go beyond the federal minimum voluntarily. The competitive pressure to not expire balances on store-specific cards is significant; customers notice and complain.

Open-loop prepaid cards from Visa, Mastercard, or American Express follow the federal minimums exactly. Funds are valid for five years from the card's expiration date printed on the front — that date is not when the balance expires, it's the end of the five-year protection window. Inactivity fees can and often do apply after 12 months. Check the cardholder agreement that came with the card for the specific fee schedule.

State cash-back laws

Ten states require retailers to redeem gift cards for cash when the remaining balance drops below a threshold. California's threshold is $10, the highest in the country, set by Cal. Civil Code § 1749.5. The others range from $1 to $5.

To request cash back, present the card at any retail location in the applicable state. The cashier can process the redemption at the register. Some retailers may not be aware of this requirement — politely reference the state statute if needed. Staff at self-checkout or a guest services desk are often more helpful than a regular register lane.

Unclaimed property and escheatment

If a gift card goes unused for an extended period, some states require retailers to turn over the unredeemed balance to the state as unclaimed property. The card technically retains value — the original holder can file an unclaimed property claim through their state treasurer's office — but the retailer is released from its obligation once the funds have been remitted.

Delaware is notable for aggressively enforcing gift card escheatment rules. Because most major retailers are incorporated in Delaware, the state has pursued substantial unclaimed property collections. This has prompted several retailers to update their cardholder agreements and expiration disclosures specifically to comply with Delaware's audit requirements.

What these laws do not cover

The federal Credit CARD Act rules do not apply to:

• Cards sold at a discount to face value
• Cards issued as part of a class action settlement
• Prepaid cards used to distribute government benefits
• Cards issued under a rewards or loyalty program where no money was paid

This page is informational. For case-specific guidance — particularly if you are dealing with a large balance, an estate, or a dispute with a retailer — consult a consumer protection attorney in your state.