Jane Bradley: The problem with gift vouchers we should all know about

Aged relatives may be fond of gift vouchers but they can come with some expensive small print, warns Jane Bradley.

They are probably buried in the back of your wallet, down the side of the sofa cushions or still languishing on the mantlepiece long after the birthday cards they came with have been thrown away.

I’m talking about gift cards - that ubiquitous present option for the relative who wants to give you a personal gift, but has no idea what to buy.

The problem is that they are often – and quickly – forgotten about, meaning that at least £5.40 out of every £100 that is put onto a gift card is never spent. In total, £300 million is wasted on them every year, according to figures from the UK Gift Card & Vouchers Association.

It is a huge sum of money: about the same amount that it costs every year to run the Royal Family. It is also more than the sale price of what is believed to be the world’s most expensive house – a luxury chateau in France, which was last year bought by a Saudi Crown Prince for $301m (£228m). In the UK, the £6 billion sector is not well regulated. Retailers have the option of slapping expiry dates on the cards which can be as long or as short as they like. Some are as tight as just eight weeks, and that can mean the Christmas tree decorations have barely been taken down before the recipient has already lost their chance to cash in their gift.

For, while most retailers do state the terms and conditions on the card as to how long it can be used, a sneaky few calculate that date from the time of purchase, rather than the day of the gift, meaning that if Great Auntie Morag has had a stash of cards hidden away in her drawer for a while before she pops it in the post for your birthday, you could be out of pocket before you even receive the card.

Companies including Asda and Boots have a respectable – but still possibly too short – two-year limit, but retailers Aldo, Apple Store, Disney, Foot Locker and Selfridges, on the other hand, do not have any expiry dates at all on their cards, proving that it is possible while still running a money-making business.

Some other companies, often smaller retailers, have goodwill gestures allowing consumers to extend expired vouchers free of charge. However others allow the vouchers to be reissued only if a fee is paid which can be as high as £10.

One card – the One4all multi-store card, which is accepted in retailers including Marks & Spencer and Primark – applies an ‘inactive balance charge’ of 90p per month after 18 months from the date of purchase. This fee is added every month until the value of the gift card hits zero, gradually chipping away at the generous present originally given.

A few years ago, I was given a voucher for a cook school in Edinburgh, which had a one-year expiry date. Unfortunately, shortly after I received the voucher, I found I was pregnant, which meant I would have been unable to taste most of the fancy-schmancy food we would be learning to cook – a raw egg here, some unpasturised cheese there. The company in this case – after a bit of less-than-gracious tutting and sighing, I have to say – agreed that I had extenuating circumstances and allowed me to extend it by another six months until I could fit in a course.

It is not always that easy. One friend recently had a gift card flamboyantly and humiliatingly ripped up in front of him at a local pizzeria because the owner deemed it to be out of date – despite the fact that there was no obvious expiration date written anywhere on the card. Another friend lost £150 when her partner bought her vouchers for an indoor ski centre. As they do not live close by, it took some time before she could find a course which she could fit in. Ten months later she tried to book for a set of sessions which would have cost her £100 more than the value of the vouchers – to be told that they were invalid. She ended up not booking the course at all – and the centre lost out on valuable business, not to mention the loss of reputation.

Another pal was given a voucher for a luxury online store as a wedding present, but discovered six months later when she tried to spend it that what she had thought was a year’s expiry date had already passed because her friend had been organised and bought it a while in advance.

This is perfectly legal within UK guidelines. Consumers also have little rights when it comes to cards held for retailers which go bust. When BHS went into administration two years years ago, customers holding gift vouchers were told that they could use them in store before the shops closed, but only if they were spending double the amount held on the card.

Technically, consumers who own a gift card from a defunct company have an equal legal right as corporate creditors who are owed thousands of pounds. In such a case, card holders should write to the administrator, stating how much they are owed and why. If there is any money left in the company after assets have been sold off, creditors should receive as much of their money back as possible.

Yet, in practice, it is unlikely that many people would go to such bother for the sake of a few quid. In short, retailers can do whatever they like. To be fair to them, they, especially smaller firms, do need to manage their cash flow. They can’t afford to have a consumer come along ten years after a voucher has initially been bought and the money long gone through the company accounts – and snaffle hundreds of pounds worth of goods.

Yet it should be possible to find a happy balance. In some parts of Australia, the law was changed last year to ensure that consumers have a minimum of three years by which to use their cards, while in the US, regulations mean that companies should offer a five-year expiry limit.

Meanwhile, the growing discount voucher industry often sends out reminders telling people that they need to use their vouchers by a certain date – or risk losing them. It would not be a difficult thing for retailers to do. And they need to clean up their act.