California Gift Card Law: Cash Back, Fees, and Exemptions

Under California gift card law, the card you were given can’t expire, almost never carries fees, and must be redeemed for cash whenever the remaining balance drops below $10. Those protections come from Civil Code Sections 1749.45 through 1749.6, and together they give California some of the strongest gift card rules in the country.¹

No Expiration Dates, and Almost No Fees

Civil Code Section 1749.5 makes it illegal to sell a gift card with an expiration date in California. Any gift card sold after January 1, 1997 stays valid until you spend the full balance or ask for a replacement. There is no use-by deadline, and the balance does not shrink simply because you haven’t touched the card.¹

The statute also bans service fees, dormancy fees, and inactivity fees. One narrow exception exists, and a dormancy fee is legal only if every one of these conditions is met:

The remaining balance is $5 or less when the fee is charged.
The fee is no more than $1 per month.
There has been no activity on the card, including purchases, reloads, or balance inquiries, for at least 24 consecutive months.
The card is reloadable.
The fee amount, frequency, and trigger are printed on the card itself in at least 10-point font, visible before purchase.

Miss any single condition and the fee is illegal. Most standard retail gift cards aren’t reloadable, so in practice you should never see a dormancy fee on a typical store gift card in California.¹

Cash Back on Balances Under $10

This is the rule most Californians never hear about. If your gift card balance is under $10, the retailer has to give you that amount in cash when you ask. Not store credit. Not a new card. Actual cash. The rule covers any balance from one cent up to $9.99.¹

You do have to ask. Retailers don’t offer cash back automatically, so walk to the register and request it. Payment can be in currency, by check, or by electronic funds transfer if you both agree to that method.¹

Once the balance is $10 or more, the retailer chooses whether to redeem for cash or issue a free replacement card. You can’t force a cash payout at that level. But you can spend the card down below $10 and then exercise the cash-back right on what’s left.¹

Which Cards the Law Doesn’t Cover

Not every prepaid card falls under the California statute. Section 1749.45 defines “gift certificate” to include gift cards and electronic gift cards, but it carves several categories out.

Visa, Mastercard, and Other Open-Loop Cards

Cards usable at multiple unaffiliated retailers, typically branded with a major payment network like Visa or Mastercard, are excluded so long as any expiration date is printed on the card. Federal law governs these instead. A mall gift card where all the shops share common ownership is not open-loop for this purpose and stays covered by California law.

Promotional, Loyalty, and Award Cards

A card you got free through a rewards program, loyalty incentive, or promotional offer is exempt because you didn’t pay for it. The issuer can put an expiration date on these, but the date has to appear in capital letters in at least 10-point font on the front of the card.¹

Fundraising and Food Product Cards

Cards sold below face value to employers, nonprofits, or charities for fundraising purposes are exempt if the expiration date is no more than 30 days after the date of sale. Cards issued specifically for food products are also exempt.¹

Federal Rules Fill the Gap for Open-Loop Cards

Where California’s statute doesn’t reach, federal law does. The Credit CARD Act of 2009 added Section 1693l-1 to the Electronic Fund Transfer Act, setting a nationwide baseline. California’s rules are stricter, so federal law mainly matters for the cards California exempts.

Under the federal rule, gift card funds can’t expire sooner than five years after the card was issued or last loaded. Dormancy, inactivity, and service fees are prohibited unless there has been no activity for at least 12 months, the fee terms are clearly disclosed on the card, and no more than one fee is charged per month.²

Federal law does not preempt California’s stricter rules. A closed-loop retail gift card in California is controlled by the state’s blanket ban on expirations and its tighter fee limits. A Visa or Mastercard gift card gets the federal five-year floor and federal fee restrictions.²

When a Retailer Refuses Cash Back

Cashiers often refuse cash-back requests because they don’t know the rule, not because their employer told them to. Ask for a manager and reference California Civil Code Section 1749.5. Most refusals dissolve once a supervisor is involved.

If the company itself refuses as a matter of policy, enforcement options are real. The cash-back requirement is one of the most actively litigated consumer protection statutes in California, with claims brought both as class actions and as government enforcement actions. Chipotle paid $246,000 in civil penalties, restitution, and costs after the Sonoma County District Attorney alleged the chain was refusing to honor the under-$10 cash-back right. As part of the settlement, Chipotle had to create a dedicated online portal for consumers to request refunds on low-balance gift cards.³

For a valid cash-back request that the retailer still won’t honor, you can file a complaint with the California Attorney General’s office or your county district attorney’s consumer protection unit. Individual amounts are usually too small to justify hiring a lawyer, but the statute’s litigation history shows attorneys do take these cases on a class-wide basis when a retailer has a pattern of refusing.

If the Retailer Files for Bankruptcy

California treats gift card money as your property, not the retailer’s. Civil Code Section 1749.6 declares that a gift certificate “constitutes value held in trust by the issuer” on behalf of the cardholder, and that the value “belongs to the beneficiary…and not to the issuer.”⁴

That designation matters most when a retailer files for bankruptcy. Under Section 1749.6, the retailer must continue to honor gift cards issued before the filing date because the balances are trust property belonging to cardholders. Card terms can’t include language voiding the card in a bankruptcy.⁴

Enforcement during an actual bankruptcy can be harder than the statute suggests. A retailer reorganizing under Chapter 11 will usually ask the court for permission to keep honoring gift cards to preserve customer goodwill. A retailer liquidating and closing all stores may simply stop taking cards, leaving holders to file as unsecured creditors. If you hear a retailer is in financial trouble, spending your balance quickly is the safest move.

Lost, Stolen, and Scammed Cards

The law offers less here. Section 1749.6 says explicitly that it does not require an issuer to replace a lost or stolen gift card. You carry the risk of loss, much like losing cash.⁴

Many retailers will still help you recover a balance if you can prove you owned the card. Save the purchase receipt, or register the card online with the issuer as soon as you get it. With the card number or the original receipt, the retailer may be able to freeze the old card and move the balance to a replacement. Report the loss to the issuer immediately, because any purchases made before you notify them are your loss for closed-loop retail cards.

Gift cards are a favorite tool of scammers because, like cash, the funds are almost impossible to recover once spent. If anyone contacts you demanding payment by gift card, whether they claim to be from the IRS, a utility company, law enforcement, or tech support, it’s a scam. No legitimate business or government agency asks for gift card payments.

If you’ve already shared a gift card number and PIN with a scammer, contact the issuer immediately. The FTC acknowledges that once the number and PIN are out the money is likely gone, but contacting the issuer quickly gives you the best chance of freezing whatever remains. Then report the incident to the FTC at ftc.gov/giftcards.⁵

1
California Legislative Information. California Civil Code CIV 1749.5
2
Office of the Law Revision Counsel. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards
3
Sonoma County District Attorney. Chipotle Settles Consumer Protection Case for Violating California’s Gift Card Redemption Law
4
California Legislative Information. California Civil Code CIV 1749.6
5
Federal Trade Commission. Report Gift Cards Used in a Scam