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Do You Have To Give Your Customers "Cash Back" on Your Gift Cards?
By Daniel Garner on September 10, 2012 at 9:22 AM

As gift cards continue to rise in popularity among consumers, the regulations and laws that companies must follow in issuing and accepting them continue to increase as well. Beyond the extensive requirements of the new federal gift card law – Regulation E – one of the issues just starting to gain traction with state legislatures is the idea of requiring retailers to give customers “cash back” on a gift card once the balance falls below a particular level.

New Jersey recently became the second state to formally join the movement when on July 29, 2012, Governor Chris Christie signed Senate Bill 1928 into law. As of September 1, 2012, all retailers in New Jersey must allow any customer holding a gift card with a balance below $5.00 to redeem the gift card for cash upon request. A violation can result in a statutory penalty of up to $500 per violation, so the failure to comply can get costly pretty quickly. Notably, there are a few exceptions, such as the fact that retailers do not have to provide cash back if the initial value of the card was below $5.00, or if the card is redeemable at multiple unaffiliated merchants (such as a mall gift card). Otherwise, however, retailers in New Jersey must provide cash back to any customer who asks once the value of the card has dropped below $5.00.

Oregon is the only other state that currently requires retailers to provide cash back to customers on gift cards where the value has decreased to below $5.00, but similar legislation is also currently pending in Illinois, and has been considered in various other states during the past two years. So, you can likely expect similar laws to continue to crop up elsewhere in the country. Until then, if you are not operating in Oregon or New Jersey, you are not required to provide customers cash back on your gift cards.

If you have question about this or any of the federal gift card regulations, we can provide quick, practical advice.

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