MC Explains: What happens to your expired bank-issued gift cards? Here’s the answer

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All of us are familiar with gift cards issued by banks. What is a gift card? Its functionality and appearance are similar to a debit card’s, the only difference being that it is preloaded with a specific amount of money by the person who gifts it. The gift card recipient can then use the money loaded in the card to make a variety of online and in-person retail transactions using electronic payments.

What happens to the expired or unspent amount on these cards?

On 6 February, the finance ministry disclosed that as of December 31, 2022, the total number of expired gift cards was 11.6 crore with an outstanding unspent balance of Rs 85.25 crore.

In a written reply to a question in the Lok Sabha Minister of State for Finance Bhagwat Karad said that according to the Reserve Bank of India RBI guidelines, banks are permitted to issue prepaid gift instruments with a maximum value of each not exceeding Rs10,000, with a minimum validity of one year.

Are there any provisions to return money to claimants?

The minister said that according to RBI guidelines, "cash-out or fund transfer is not permitted for such instruments."

Additionally, the minister clarified that the funds may be transferred back to the source account (account from which the gift card was loaded) after receiving the consent of the pre-paid instrument holder.

Can these cards be revalidated?

The minister said the gift cards are revalidated, including through the issuance of new instruments as and when requested by the gift-card holder.

What are the different types of gift cards issued by banks?

Open Loop (or network): This is widely acknowledged as it is associated with a certain network. Thus, these types of gift cards can be used at any place that accepts all cards issued by the brand.

Closed Loop: It can only be used for a select number of brands or it is only accepted at specific locations.

Further, some cards differentiate on the basis of the ability to reload:

Reloadable: Gift cards that can be repeatedly reloaded with money until their expiration date.

Non-reloadable: Gift cards of this type can only be loaded once. Non-reloadable cards, however, occasionally become reloadable following a certain registration procedure with the issuing bank.

Banks typically issue open-looped gift cards that could also be subject to surcharges. The purchased gift card will have an expiration date; however, you will still receive an electronic authorisation with it. Such cards also offer a choice of whether to reload or not.