Gift Card Dormancy and Inactivity Fees: Rules, Limits, and Remedies

Under federal law, gift card dormancy and inactivity fees are prohibited unless the card has gone unused for at least 12 consecutive months, and even then the issuer can charge no more than one fee per calendar month. The rule comes from the Credit CARD Act of 2009, codified at 15 U.S.C. § 1693l-1, and it applies to both store gift cards and general-use prepaid cards carrying a network logo like Visa or Mastercard. Some states go further and ban these fees entirely.

The 12-Month Rule and the One-Fee-Per-Month Cap

Two conditions have to be satisfied before any dormancy, inactivity, or service fee is lawful. First, the card must have seen zero activity for the 12-month period ending on the date the fee would be imposed.¹ Second, once that year of inactivity passes, only one fee can be assessed in any given calendar month.² An issuer cannot wait several months and then stack the missed fees into a single charge that drains a small balance.

Both conditions apply at once. The 12-month clock resets every time the card is used, and “activity” is broad: a purchase, a reload, or even a balance inquiry counts. If the card has been sitting in a drawer, using it for anything, however small, restarts the waiting period and pushes any lawful fee out another full year.

Balance Inquiry Fees Follow the Same Rule

The Consumer Financial Protection Bureau treats a balance inquiry fee as a service fee, meaning it is subject to the same 12-month waiting period and the same one-per-month cap.³ A charge of a dollar or two every time you check your balance during the first year of the card’s life is not lawful.

Which Cards the Rules Cover

The federal fee protections reach two categories of card. Store gift cards, sometimes called closed-loop cards, work at a specific retailer or a group of affiliated stores. General-use prepaid cards, or open-loop cards, carry a network logo and are accepted wherever the network operates. Both are covered.

Several product types fall outside these protections, and the fee rules do not apply to them:¹

Loyalty, award, or promotional cards where no money changed hands at purchase.
Reloadable prepaid cards not marketed as gifts.
Prepaid calling cards used solely for phone service.
Cards not marketed to the general public, such as employee incentive or business-to-business reward cards.
Paper-only gift certificates, including event tickets.
Cards redeemable solely for admission to a specific venue or event.

If someone bought you a store gift card or a Visa-branded card with a set dollar amount, you have full federal protection. If your employer handed you a rewards card for hitting a sales goal and no money was exchanged to buy it, the federal fee rules may not reach it.

When a Fee Is Enforceable Only If It Was Disclosed

Even when the 12-month waiting period has passed, a fee is only enforceable if four pieces of information appear clearly and conspicuously on the card itself:¹

A statement that a dormancy, inactivity, or service fee may be charged.
The dollar amount of the fee.
How often the fee can be assessed.
That the fee may be assessed for inactivity.

Printing this information on outer packaging, on a sticker affixed to the card, or in a paper insert does not satisfy the requirement. The regulation specifically prohibits relying on accompanying documents or packaging to meet the on-card disclosure rule.² If the card in your hand says nothing about fees, the issuer has no legal basis to draw money out of the balance.

The issuer must also disclose fees to the purchaser before the sale, whether the card is bought in a store, over the phone, or online.¹ Both disclosures have to happen. Skipping either one takes the fee off the table.

Expiration Is a Separate Rule

Fees and expiration are governed by different provisions of the same statute, and they are easy to confuse. Federal law makes it illegal to sell a gift card with an expiration date earlier than five years from the date the card was issued or the date funds were last loaded onto it.⁴ Many major retailers no longer print expiration dates at all.

The physical card can expire while the funds remain yours. When a card’s printed expiration date passes but the underlying money has not expired, the issuer has to provide a replacement card or return the balance by another method, such as a check. No fee can be charged for that replacement unless the card was lost or stolen.³

State Laws That Go Further

The federal rules set a floor. Where a state law gives consumers more protection, the state law controls. Several states have banned dormancy and inactivity fees on gift cards outright, so the 12-month waiting period never comes into play for cards purchased or used there. Others cap fees at lower amounts or extend the no-fee window well past 12 months.

Roughly three dozen states and territories have some form of gift card statute addressing fees, expiration dates, or both. The specifics vary. Some states prohibit all fees and all expiration dates; others address only one. Checking your state’s consumer protection statutes is the reliable way to know what applies where you live.

About a dozen states also require merchants to convert a small remaining gift card balance into cash on request. Thresholds vary, typically between $1 and $10, with $5 being the most common cutoff. One state uses a percentage instead: if the card has been redeemed for at least 90 percent of its face value, the holder can request cash for the remainder. Around 40 states impose no cash-back requirement at all.

What to Do If You Were Charged an Illegal Fee

Gift card protections sit inside the Electronic Fund Transfer Act, so its enforcement framework applies. A consumer wrongly charged a fee can sue and recover actual damages plus a statutory penalty of $100 to $1,000, along with attorney’s fees and court costs.⁵ In a class action, total recovery can reach the lesser of $500,000 or one percent of the issuer’s net worth. The attorney’s fees provision is what makes an individual case realistic to bring.

Before litigation, most disputes are worth raising with the issuer directly. Point to the specific problem: the fee was charged before 12 months of inactivity, more than one fee was assessed in a single month, or the card itself does not carry the required disclosures. If the issuer will not refund the fee, the Consumer Financial Protection Bureau accepts complaints about prepaid cards at consumerfinance.gov/complaint or by phone at (855) 411-2372.⁶ The CFPB forwards complaints to the issuer for a response and uses complaint data to identify patterns worth investigating.

1
Office of the Law Revision Counsel. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards
2
eCFR. 12 CFR 1005.20 – Requirements for Gift Cards and Gift Certificates
3
Consumer Financial Protection Bureau. 1005.20 Requirements for Gift Cards and Gift Certificates
4
GovInfo. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards
5
Office of the Law Revision Counsel. 15 USC 1693m – Civil Liability
6
Consumer Financial Protection Bureau. Submit a Complaint