State Gift Card Laws: Expiration, Dormancy Fees, and Cash Back

State gift card laws build on top of a federal rule that no gift card can expire sooner than five years after it was purchased or last reloaded. About half the states add stronger protections: some ban expiration dates entirely, some prohibit dormancy and service fees, and several require merchants to pay out the remaining balance in cash once it drops below a set amount. Where you bought the card and where you try to use it both matter, because the rules travel with the sale.

The Federal Floor Every State Must Meet

The Credit CARD Act of 2009 added gift card protections to the Electronic Fund Transfer Act. Under 15 U.S.C. § 1693l-1, the money on a gift card cannot expire earlier than five years after the card was issued, or five years after the most recent reload for cards that can be topped up.¹ Reloading resets the clock.

Dormancy, inactivity, and service fees are allowed under federal law, but only after the card has gone twelve months without use. After that point, the issuer can charge no more than one such fee per calendar month, and the fee has to be disclosed clearly on the card itself before you buy it.² A disclosure tucked into a packaging insert that gets thrown away does not count; it has to appear on the card or code you keep.³

These rules cover both store gift cards (good at one retailer or chain) and general-use prepaid cards that carry a payment network logo and work at many merchants. If your state has not passed anything stronger, these federal minimums are what govern your card.

States That Ban or Extend Expiration Dates

Several states have erased the five-year expiration floor and replaced it with no expiration at all. If a card sold in one of these states has a date printed on the front, that date is unenforceable.

California: Gift cards sold in the state cannot carry an expiration date.⁴
Florida: Purchased gift cards cannot expire and cannot be charged any post-sale fee. Cards given away through loyalty or promotional programs can still carry an expiration date.⁵
Connecticut: No gift card may be sold with an expiration date, and language on the card suggesting one is unenforceable.⁶
Washington: A gift card stays valid until it is redeemed or replaced.⁷
Montana: Gift cards are valid until redeemed and cannot be reduced in value by any fee.⁸

Other states stretch the expiration window well past the federal five years rather than banning it outright. New York requires that the underlying funds last at least nine years from issuance or the last reload.⁹ Massachusetts sets a seven-year minimum.¹⁰ New Jersey bars the funds from expiring within 24 months of sale.¹¹

If a cashier refuses a card because of a date stamped on it in a state that bans or extends expiration, the state consumer protection office handles those complaints.

States That Restrict Dormancy and Service Fees

Federal law lets issuers charge a monthly dormancy or inactivity fee after a year of non-use. Several states have shut that off, which prevents a modest card from being drained to zero by small monthly deductions.

New York bans every category of post-sale fee on gift cards: no dormancy charge, no service fee, no maintenance fee, no balance-inquiry fee. The one exception is a one-time activation fee on open-loop (bank-issued) cards, capped at nine dollars and tied to the actual cost of issuance.⁹ Florida likewise bans post-sale charges on purchased gift cards, including dormancy, maintenance, and cash-out fees.⁵ Illinois prohibits any post-purchase fee on cards issued since 2008 and does not allow the face value to be reduced for inactivity. Montana prohibits reducing a card’s value by any fee at all.⁸

New Jersey splits the difference. Dormancy fees are prohibited for the first 24 months after purchase and for 24 months following the most recent transaction. After that window, a dormancy charge is allowed but cannot exceed two dollars per month.¹¹

In states without their own fee rules, the federal baseline governs: no fee during the first twelve months of inactivity, one fee per month maximum after that, and the fee must have been disclosed on the card before you bought it.² Activation fees are a separate matter. Federal law does not cap them but requires the amount and conditions to appear on the card before purchase.³ New York’s nine-dollar cap is one of the only direct state limits.

Cash-Back Rules When the Balance Runs Low

Some states require the merchant to pay out the remaining balance in cash once a card drops below a set amount. You ask at the register; the law does not require you to call a corporate office or mail the card anywhere. If the cashier is unfamiliar with the rule, asking for a manager usually resolves it.

California, $10: If the balance is under ten dollars, the merchant must redeem it for cash on request.⁴
Washington, $5: After at least one purchase, any remaining balance under five dollars must be cashed out on demand.⁷
Colorado, $5: Any remaining balance of five dollars or less must be redeemed in cash upon request.¹²
Oregon, $5: If the card has been used at least once and the remaining value is below five dollars, the holder can request cash or a check.¹³
Montana, $5: Applies when the original card value was more than five dollars and the remaining balance has dropped below five dollars.⁸
Maine, $5: If the card is redeemed in person and a balance under five dollars remains, the merchant must refund it in cash.¹⁴
Rhode Island, $1: Cash back is required when the balance drops under one dollar.¹⁵
Vermont, $1: Same one-dollar threshold.¹⁶

Promotional and Loyalty Cards Are Treated Differently

The federal expiration and fee rules do not apply to cards you received for free as part of a promotion, loyalty program, rebate, or similar giveaway.¹ For a card to qualify for this exemption, the recipient must not have paid for it, and the card has to carry disclosures identifying it as promotional, listing the expiration date, and spelling out any fees.³ A card missing those disclosures cannot be treated as promotional.

State laws often carry the same split. Florida protects purchased gift cards but allows expiration dates on promotional and loyalty cards.⁵ New York carves promotional cards out of its nine-year rule, provided the card was issued for no payment and says “promotional” on its face.⁹ Treat any free card as weaker and use it first.

Store Cards vs. Bank-Issued Prepaid Cards

Store gift cards are tied to one retailer or chain. Open-loop cards carry a payment network logo (Visa, Mastercard, and so on) and work anywhere that accepts the network. The federal five-year expiration floor and dormancy-fee limits cover both types.³

At the state level, the categories can diverge. Florida bans expiration dates and post-sale fees on store gift cards but exempts cards issued by financial institutions that work at multiple unaffiliated merchants.⁵ New York applies its fee ban to all gift cards but singles out open-loop cards as the only type that can carry an activation fee, up to nine dollars.⁹ If you are buying or holding a bank-issued card, check whether the extra state protections cover it or only the store variety.

If the Retailer Goes Bankrupt

State protections largely stop mattering once a retailer enters bankruptcy, because federal bankruptcy law takes over. What happens to your card depends on how the court handles the filing. In a Chapter 11 reorganization, the retailer sometimes asks the court for permission to keep honoring gift cards so customers keep shopping, and courts often grant it. That is not guaranteed; some retailers delay the request or never make it.¹⁷

If the retailer stops accepting cards, your only option is filing a proof of claim as an unsecured creditor. Gift card holders have not been given priority over other unsecured creditors, and unsecured creditors in retail bankruptcies typically recover a fraction of what they are owed or nothing at all. If a retailer is reported to be in financial trouble, the safest move is to spend the card immediately.

Practical Steps to Protect the Balance

Spend it early. Bankruptcy, store closings, and forgetfulness do more damage than any legal fee. Treat the card like cash.
Keep the receipt. It is your proof of ownership if the card is lost or damaged and you want to ask the retailer for a replacement.
Register the card. Many bank-issued and some store cards can be registered online, which helps with replacement and disputed charges.
Ask for cash when the balance is low. If you are in a state with a cash-back threshold and the remaining value is under the limit, request the cash at the register instead of hunting for something priced to the penny.
Read promotional fine print. A free card from a loyalty program can expire sooner and carry fees that a purchased card cannot. Use these before anything else.
Search your state’s unclaimed property database. Old balances sometimes end up in the state treasury, and the original holder can file a claim to get the money back.

1
Office of the Law Revision Counsel. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards
2
Federal Reserve. Highlights of Final Rule Regarding Gift Cards
3
eCFR. 12 CFR 1005.20 – Requirements for Gift Cards and Gift Certificates
4
Justia Law. California Civil Code 1749.5 – Gift Certificates
5
Florida Senate. Florida Statutes 501.95 – Gift Certificates and Credit Memos
6
Justia Law. Connecticut General Statutes 42-460 – Gift Certificate Subject to Expiration Date Prohibited
7
Washington State Legislature. RCW 19.240 – Gift Certificates
8
Montana State Legislature. Montana Code 30-14-108 – Termination of Gift Certificate
9
New York State Senate. New York General Business Law 396-I – Acceptance of Unexpired Gift Certificates
10
General Court of Massachusetts. Massachusetts General Laws Chapter 266 Section 75C
11
Justia Law. New Jersey Revised Statutes 56:8-110 – Gift Certificates and Gift Cards
12
Justia Law. Colorado Revised Statutes 6-1-722 – Gift Certificates
13
Oregon Public Law. ORS 646A.276 – Sale of Gift Card That Expires, Declines in Value
14
Maine State Legislature. An Act To Protect Consumers Gift Card Interests
15
Rhode Island General Assembly. Rhode Island General Laws 6-13-12 – Sales of Gift Certificates
16
Vermont General Assembly. Vermont Statutes Title 8 Chapter 81
17
Federal Reserve Bank of Boston. Gift Card Value When Issuers Go Bankrupt