Shoppers this holiday season are expected to spend more than ever on gift cards, which have long been issued by retailers, such as Macy's, but are increasingly offered by malls, such as Ala Moana Center.

The mall gift cards, which work like prepaid credit cards, are providing added convenience for consumers, but also proving frustrating for some shoppers and consumer advocates.

That's because multi-merchant gift cards, which are typically issued by credit-card companies and banks, don't work exactly the same as gift cards issued by retailers. Multi-merchant cards also typically have service fees that can reduce a card's value, though a Hawai'i law that took effect in July bars such fees within two years of purchase.

Nu'uanu resident Rene Kaji received two gift cards issued through Ala Moana owner General Growth Properties Inc. last Christmas and found them versatile for their use at multiple mall merchants. But she said the cards also frustrated her.

For instance, to redeem a card's full value, she had to inform a merchant of the exact value on the card. Several mall kiosks can read a card's balance, but merchants can't. If a merchant tries to redeem 1 cent more than the card holds, the transaction is denied.

Kaji said she tried to exhaust one of her cards at the Gap while not certain of her card's remaining balance, which she estimated to be $10 to $20. She said she bought something for about $11 with the card and then threw the card away because of the hassle of obtaining a balance.

General Growth's gift card also allows such merchants as restaurants and hair salons to reserve 20 percent of a card's balance as a temporary gratuity hold that can prohibit redemption of a card's full value for up to a week. The hold is similar to the one some credit card issuers use in situations when the customer may later add a tip to the total charged.

Kaji said she ran into trouble over that with her second card when she spent $40 of the $50 card at Assagio Ristorante Italiano. After dining, she tried to spend the $10 balance at Macy's but couldn't because of the restaurant's $8 hold. Kaji said she spent the $10 on another visit after the hold was released.

A similar delay takes place on General Growth cards that receive a credit if a consumer returns merchandise bought with the card.

General Growth spokesman Wally Brewster said that because the cards are relatively new, there has been a learning curve affecting merchants and consumers.

For instance, merchants accepting gift cards don't have to apply gratuity holds. Gift card users also can ask merchants not to apply the holds.

You can use the entire balance on the card. First, check the balance at the mall kiosk. Then find an item you want that costs at least that much. If the cost is more than you have left on your card, pay as much as you can with the gift card and pay the rest with cash or a credit card.

Brewster said overall the cards have been positive for users, merchants and the malls.

"It's been very, very favorable," he said. "It's becoming one of the most asked-for gifts during the holidays, especially at the last minute when you don't know what to get someone."

Hawai'i consumers haven't been heavily exposed to such cards until recently.

According to a survey by American Express, 57 percent of people plan to buy a gift card this year, spending roughly a third of their holiday gift shopping budget, or $339, on cards. The National Retail Federation estimates that consumers will spend $18.5 billion on gift cards this holiday season.

The biggest issuer of prepaid mall gift cards locally has been General Growth, the nation's second-largest mall owner and operator. Last year, the company introduced its gift card program at Ala Moana and Victoria Ward Centers.

This year, General Growth made its gift card available and redeemable at Prince Kuhio Plaza on the Big Island and Whalers Village on Maui, and redeemable but not available for purchase at Windward Mall on O'ahu and Queen Ka'ahumanu Center on Maui. The cards can be redeemed at 98 percent of stores (those accepting American Express, which manages the gift card program) at any of General Growth's 225 malls nationwide.

Brewster would not estimate how many cards the company will sell in Hawai'i, but several million will be sold nationally.

Some consumer organizations caution against use of prepaid gift cards because those issued by malls and credit card companies often assess service fees, inactivity charges and expiration penalties that can wipe up to the entire balance off a card, some of which are being sold with values as high as several thousand dollars.

"They're great for some people ... but consumers need to be very careful," said Dan Horne, a Providence College assistant professor of marketing who has studied gift cards. "People have to be careful about what the terms and conditions are."

Hawai'i law requires gift cards be valid for at least two years, during which time service fees are prohibited. After two years, service fees may be applied.

Stephen Levins, executive director of the state Office of Consumer Protection, said retailers issuing cards have done a good job complying with Hawai'i law, which went into effect in July after passage last year, and that there haven't been consumer complaints about fees.

Levins also said that most national retailers with gift card programs follow the law in the state in which cards are used, so Hawai'i consumers receiving gift cards from someone on the Mainland don't need to worry about terms and conditions applying to cards where they were purchased.

But cards sold, including General Growth's, don't always make it clear how a card's disclosed rules are affected by Hawai'i law.

General Growth cards come with 12 credit-card size pages of fine print explaining rules that include provisions to withdraw a service fee of $2 a month after 12 months. A separate tip sheet explains that "subject to applicable law, fees will not be assessed on all cards currently being sold in Hawai'i at this time."

Brewster said General Growth gift cards issued in Hawai'i have no expiration date. Other standard terms, such as charging consumers $1.50 to buy the card and $6 to issue a replacement card also do not apply.

Brewster said such fees charged on the Mainland but not here are necessary to provide the card, which American Express charges General Growth to produce and process. "There is a cost," he said. "There are just significant costs that in Hawai'i, unfortunately, we are not able to recoup. It is not a profitable venture for us."

Horne said mall-issued gift cards are attractive to shopping center owners because they drive consumers to malls, and those consumers typically spend more than their gift cards are worth.

"It's the found-money principle," he said. "If I walk into a bar and I find $20 ... I'm much freer with my money because it's not really my money. Same thing with a gift card."

But for mall operators, gift cards can be expensive, which is partly why many smaller or independent mall operators — like Pearlridge and Kahala Mall — don't have gift card programs but rely on paper gift certificates for similar benefit.

Prepaid gift cards issued by a single retailer, such as Home Depot, usually don't have a surcharge or service fee because retailers earn interest on card values until redeemed and they encourage more shopping at their store.

When you buy a gift card, you are, in effect, lending the retailer money until the card is used to make a purchase. Still some merchants, such as Pizza Hut, and many Mainland malls sell cards that assess fees.

Several banks and credit card companies like Visa, Discover Card and Amex also distribute "universal" gift cards that come with service fees and can be used anywhere their cards are accepted.

Hawai'i is one of two states in which General Growth does not sell Amex's universal gift card because the card's $3.95 sale surcharge and service fees would violate state law.

While Hawai'i law prohibits surcharge and service fees on gift cards, many consumers aren't aware of the new law or how it affects gift card conditions that can vary depending on the issuer.

Consumers Union, the nonprofit publisher of Consumer Reports, last year urged Congress to pass national legislation to prohibit prepaid gift card issuers from charging "excessive fees and imposing unreasonable expiration dates."

Expiration penalties that liquidate gift card values are largely invalidated under another Hawai'i law that directs any unused balance after cards expire into a state fund for unclaimed property, which consumers can reclaim.

Horne, the marketing professor, said Hawai'i's law is a good one because most card issuers don't make it easy for card recipients to understand what costs can be incurred with prepaid gift cards.

"At Christmastime you're not going to sit there and go through the terms and conditions," he said. "The person buying the card may understand these things ... but it's not necessarily conveyed to the holder."

Brewster of General Growth said it's up to consumers to decide whether prepaid gift cards provide them value. "At the end of the day, the card is something you choose to buy or not to buy," he said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.