Illinois restaurant gift card law: expiry dates, fees and disclosure

Illinois has its own gift card provisions in its consumer protection and unclaimed property laws, and the federal gift card rule in 12 CFR 1005.20 sets a floor of five years before funds can expire. The safest policy for a restaurant is a card that does not expire and carries no fee, which meets both rules without a fight.

What does Illinois require?

Illinois law addresses gift cards that carry an expiration date or post-sale fees, and it connects to the state's unclaimed property rules for balances that are never used. The wording has been amended over the years, so read the current Illinois provisions, or ask the Illinois Attorney General's consumer protection office or an attorney, before you print terms. Whatever the state rule requires, the safest policy is to disclose everything clearly on the card and to keep to the federal floor described next.

What does the federal rule add?

Under 12 CFR 1005.20, the funds underlying a card must last at least five years from issuance or the last load, or until the card's own expiration date if that is later. The card must state the funds' expiration date, or that the funds do not expire, with a toll-free number or website for getting a replacement. Dormancy, inactivity or service fees are allowed only after a year with no activity, must be disclosed on the card and can be charged no more than once a month. Disclosures must be on the card itself, since packaging, stickers or separate terms documents do not count.

Which approach is best for a restaurant?

For a small restaurant, the simplest and most defensible policy is a card with no expiration date and no fees. It avoids the disclosure traps, avoids guests arguing at the table and removes the need to track which cards have expired. The cost is that unredeemed balances stay on your books, which your accountant can explain.

What about promotional cards?

The federal rule excludes loyalty, award and promotional cards from the gift card definitions, but they must still carry labeling about expiration and fees. A card for a free appetizer given to a guest for filling in a survey is promotional, and you may put an expiration date on it, as long as it is printed on the card. Keep promotional cards in a separate series with a different design, so staff do not mix them with paid cards.

A worked example for a holiday promotion

You sell $50 cards in December and offer a $10 bonus card for use in January and February. The $50 card has no expiry and no fee, so a guest can use it years later. The $10 bonus card carries Valid January 1 to February 28 on its face. A guest who loses the bonus card gets no replacement because it was promotional, but you replace a lost paid card when they can show a receipt or a card number. You record the $50 as a liability when sold and as revenue when used.

When is sales tax due?

Sales tax applies to the meal paid for with the card, not to the sale of the card itself. The point of sale should treat the sale of a card as a non-taxable liability and apply the tax to the check that the card pays. Ask your accountant how to report cards in your books, and how the city taxes you collect, such as Chicago's restaurant tax, apply to a check paid by card.

What happens to cards that are never used?

Unredeemed balances raise questions under the state's unclaimed property law. Ask your accountant or the Illinois treasurer's unclaimed property office what applies to your cards and what records you need. Do not write balances off on your own, and keep a list of outstanding balances by card.

What should the card and receipt say?

1. The business name and contact details.
2. The expiration date, or that the funds do not expire.
3. A toll-free number or website for balance and replacement.
4. Any limits, such as not redeemable for cash.
5. Any fee terms, if you charge one, which most restaurants should not.

What should you do now?

Pull a sample card, a receipt and your website terms, and compare them with the list above. Remove any fee you do not intend to charge, and replace text on the card if it is wrong, not with a sticker. Train staff on how to check a balance and apply a card, how to handle a lost card, and what to say when a guest finds an old card in a drawer. A calm, written answer at the counter prevents most arguments, and it shows guests that your terms are fair.

More guides for your business:

• Illinois automatic renewal law for dining clubs and memberships
• Illinois interchange fee law: card fees on sales tax and tips
• Illinois restaurant sales tax: how Chicago and Cook County rates stack

More in the US guides for food businesses.