FTC Flags Gift Card Scams: What Fee and Expiry Rules Mean for You

On October 19, 2026, the FTC sent Congress its annual report on protecting older consumers. It found gift cards were the payment method older adults most often reported in several common scams. For holiday buyers, that means two risks: fees and expiration terms on the card, and criminals who tamper with cards or demand payment with them. Federal rules cover the first, and some states go further.

Key takeaways

Federally, gift card money can't expire within five years of issue or last load. An inactivity fee needs a full year without activity, at most one a month, and a disclosure on the card.
Loyalty and promotional cards, paper-only certificates and reloadable cards not sold as gift cards are excluded.
Washington bans expiration dates and fees on non-bank gift cards; California has a similar ban and, since April 1, 2026, cashes out balances under $15.
The FTC says only scammers tell you to pay with a gift card. If something goes wrong, contact the card company at once; a refund is possible, not guaranteed.

What it means for you

Buying in a store: inspect the packaging and keep the receipt (see the draining section).
Buying online: fees and expiration terms must be disclosed before purchase; the FTC advises buying only from stores you trust.
Holding an old card: the federal limits cover most store and bank gift cards sold since August 22, 2010.
Older adults and families: a demand to pay by gift card is the warning sign, whoever is calling.
Washington or California residents: state law beats the federal minimums.

This article is general education, not legal advice. Rules differ by card type and state, so check the terms on your card.

Federal rules on fees and expiry

The federal rule is Regulation E, 12 CFR 1005.20. It covers gift certificates, store gift cards and general-use prepaid cards (usable at many unaffiliated merchants or ATMs) sold on or after August 22, 2010. The CFPB's consumer answer (last reviewed September 6, 2024) sums it up: funds must be good for at least five years, and inactivity fees can come only after 12 months of inactivity and if other conditions are met.

Expiration

The funds can't expire before the later of five years after issue (or last load) or the card's printed date. A card that expires sooner must give a toll-free number for a replacement and, in most cases, say the money outlasts the card. Replacing the card or paying out the balance before the funds expire must be free, unless the card was lost or stolen.

Inactivity, dormancy and service fees

A fee is allowed only if all three conditions hold:

There was no activity on the card during the one-year period ending on the day the fee is charged.
The card itself states the fee amount, how often it can be charged and that inactivity triggers it; packaging or a sticker doesn't count.
No more than one such fee is charged in any calendar month.

Activity means anything that adds or removes money, such as a purchase or reload. The CFPB's official commentary says a fee, a balance inquiry or replacing an expired card is not activity, so checking your balance doesn't restart the clock, but a purchase does.

Purchase and other fees

A one-time fee, such as an issuance fee at purchase, is not a service fee, so these limits don't cap it, though it must be disclosed. A balance-inquiry fee is a service fee and falls under the limits. Terms disclosed before purchase can't be changed afterward.

Cards the federal rule does not cover

The rule excludes cards usable only for telephone services, reloadable cards not marketed or labeled as gift cards, loyalty, award or promotional cards, cards not marketed to the general public, paper-only certificates, and cards redeemable only for admission to a particular venue or event and related purchases there.

Where state laws go further

The CFPB notes that some state laws give you more time. Two examples:

Washington: RCW 19.240.020 bans issuing or enforcing a gift certificate or card with an expiration date, any fee or a dormancy charge. A balance under $5 left after a purchase is payable in cash on demand. Expiration dates are allowed only on awards or loyalty and certain donated certificates, under RCW 19.240.030. Under RCW 19.240.100, cards issued by financial institutions and usable at multiple unaffiliated sellers are outside the chapter. If an issuer goes bankrupt, RCW 19.240.090 says it must keep honoring certificates issued before the filing.
California: Civil Code 1749.5, in the version operative April 1, 2026 (text via California Public Law), bars expiration dates and service fees, with exceptions such as free promotional certificates. A dormancy fee is allowed only if the balance is $5 or less, the fee is at most $1 a month, there has been no activity (balance inquiries count) for 24 months, the card is reloadable and the fee is printed on it. Balances under $15 are redeemable in cash, up from $10 since SB 22 took effect April 1, 2026, as a Morgan Lewis summary (March 23, 2026) explains.

Illustrative example: a $50 card left untouched

Take a hypothetical $50 card bought January 15, never used, with a $2.50 monthly inactivity fee printed on it. Following the CFPB commentary's examples for the fastest timing allowed, the first fee can come on January 15 a year later, then one on the 1st of each new calendar month.

fees by month 12 = 1 (charged on the anniversary)
fees by month 18 = 1 + 6 monthly fees = 7
fees by month 24 = 1 + 12 monthly fees = 13
balance = $50 - (fees x $2.50)

Months untouched	Fees charged	Federal maximum: balance	Washington or California store card: balance
12	1 ($2.50)	$47.50	$50.00
18	7 ($17.50)	$32.50	$50.00
24	13 ($32.50)	$17.50	$50.00

Under federal limits alone, this fee can take 65 percent of the value in two years. Washington's ban keeps the full $50 on a store card, and California's exception starts only at a balance of $5 or less. Any purchase restarts the federal clock. Federal rules only limit timing; whether a fee exists depends on the card's terms.

Card draining and scam payments

How draining works

Homeland Security Investigations (HSI) runs Project Red Hook against organized groups that exploit gift cards. On its page last updated March 19, 2026, HSI says criminals tamper with packaging to steal card information, return the cards to the shelf, then drain the money once a buyer loads it. They also break into online gift card accounts through phishing or hacking.

What to check in the store

Look for cut edges or pull tabs, off-brand logos and a wrinkled PIN cover, and compare with other cards on the rack (HSI).
If a card looks tampered with, pick another and show it to a cashier (FTC). Photograph the card and receipt (FTC), and check that the balance matches what you paid (HSI).
Check balances only on the retailer's official website, as 14 state attorneys general advised in a December 22, 2025 warning.

Maryland's anti-draining law

Maryland's Gift Card Scams Prevention Act of 2024 (Chapter 463), approved May 9, 2024, took effect in two stages, on June 1 and October 1, 2025. A Reed Smith summary says the first date applies to open-loop cards (usable at many merchants) and the second to closed-loop cards (one merchant). It calls the act the first law of its kind and says it requires packaging that hides the numbers needed to drain a card, warning signs at displays and on online product pages, and staff training for open-loop sellers.

When a payment request is the scam

The FTC's guidance on paying scammers with gift cards (July 2023) is blunt:

Only scammers will tell you to buy a gift card.

No real business or government agency will ask for one, it adds. According to the FTC's October 19, 2026 press release, fraud losses reported by adults 60 and over rose from about $600 million in 2020 to about $3 billion in 2025. The report says their gift card payments were overwhelmingly on impersonation scams, and gift cards were the top reported payment method for tech-support, romance, family-and-friend-impersonation, and prize and lottery scams. It gives no dollar total for gift card losses.

If a card is drained or you paid

Contact the card company right away. The FTC says to report however long ago it happened, with the card and receipt. Its gift card scams page lists contacts for brands including Amazon, Apple, Google Play, Target, Walmart, Visa and Vanilla. For other cards, use the number on the card.
Ask about a refund or a freeze. The FTC says some companies might give your money back, so ask. Apple and Google Play can freeze money still on a card.
Report to the FTC at ReportFraud.ftc.gov, including when you can't reach the issuer or it won't talk to you.
Report to your state attorney general's office, as the December 2025 attorneys general warning advises.

No step guarantees a refund, so keep records of every call.

Frequently asked questions

Does a printed expiration date mean I lose the money?

Not under the federal rule. The money lasts at least five years from issue or last load, even if the plastic expires sooner. Call the toll-free number on the card for a free replacement, unless it was lost or stolen.

Does checking my balance stop an inactivity fee?

Not federally: a balance inquiry is not activity, so only a purchase or reload restarts the one-year period. California's dormancy-fee exception does count balance inquiries.

Are bank-network gift cards covered, or only store cards?

Federally, both: Regulation E covers store gift cards and general-use prepaid cards. Washington's state protections don't apply to cards issued by financial institutions and usable at multiple unaffiliated sellers.

Do free promotional cards follow the same rules?

No. The federal rule excludes them, Washington allows expiration dates on awards or loyalty certificates, and California exempts free promotional certificates if the expiration date is printed on the front in capitals of at least 10-point type.

Can I get cash for a small leftover balance?

It depends on your state. The federal rule doesn't require it. In Washington, under $5 left after a purchase is payable in cash on demand (not on bank-issued cards); in California, any balance under $15 is.

Before you buy or give a card

Buy from a store you trust and check the seal and PIN cover.
Read the card itself for any fee, expiration date and replacement number.
Give the recipient the receipt, and tell them a purchase at least once a year keeps a federal inactivity fee from starting.
Never pay a bill, debt, tax or prize fee with a gift card.
If something goes wrong, call the issuer, then ReportFraud.ftc.gov and your state attorney general.