The secret life of gift cards: This is what happens to the billions that go unspent each year

Gift cards make great holiday gifts – as long as you don’t stuff them in a drawer and forget about them after the holidays.

Americans are expected to spend nearly $30 billion on gift cards this holiday season, according to the National Retail Federation. Restaurant gift cards are the most popular, accounting for a third of these sales.

Most of these gift cards are redeemed. According to Paytronix, which tracks restaurant gift card sales, about 70% of gift cards are used within six months.

But many cards – worth tens of billions of dollars – are forgotten or otherwise unused. Then the lifespan of a gift card becomes more complicated, as the expiration date or inactivity fees may vary by state.

Here’s what you should know about the gift cards you give or receive:

LOVED BUT LOST

After clothing, gift cards will be the most popular gift this holiday season. According to the National Retail Federation, nearly half of Americans plan to give them as gifts.

But many will remain unused.

Gift cards get lost or forgotten, or recipients keep them for a special occasion. In a July survey, consumer finance company Bankrate found that 47% of U.S. adults had at least one unspent gift card or voucher with an average value of $187. That’s a total of $23 billion.

THE GIFT OF TIME

Under a federal law that went into effect in 2010, a gift card cannot expire for five years from the time of purchase or from the last time someone added money. Some state laws require an even longer period. In New York, for example, a gift card purchased after December 10, 2022 cannot expire for nine years.

Differing state laws are one reason why many stores have stopped using expiration dates altogether, says Ted Rossman, a senior industry analyst at Bankrate.

USE IT OR LOSE IT

Even though gift cards can take years to expire, experts say it’s still wise to spend them quickly. Some cards – particularly generic cash cards from Visa or MasterCard – incur inactivity fees if they are not used for a year, reducing their value. Inflation also causes cards to lose value over time. And if a retail store closes or goes bankrupt, a gift card may be worthless.

Maybe consider clearing out your stash on National Use Your Gift Card Day, a five-year-old holiday created by a PR executive and now supported by several retailers. The next date is January 20, 2024.

OR SELL

If you have a gift card that you don’t want, one option is to sell it on a site like CardCash or Raise. According to Rossman, resale sites won’t give you face value for your cards, but typically 70 to 80 cents on the dollar.

THE MONEY TRAIL

What happens to the money if a gift card is not used? This depends on the state in which the retailer is based.

When you purchase a gift card, a retailer can use the money immediately. But it also becomes a burden; The merchant must allow for the possibility that the gift card will be redeemed.

Every year, major companies calculate the “breakage,” which is the amount of gift card liability that they believe cannot be redeemed based on historical averages. For some companies, like Seattle-based Starbucks, bankruptcies are a huge source of profit. Starbucks reported business interruption revenue of $212 million in 2022.

But in at least 19 states — including Delaware, where many large companies are based — retailers must work with state unclaimed property programs to return money from unspent gift cards to consumers. Money not recovered from individual consumers is spent on charitable initiatives; According to the states, it should not go to companies because they have not performed enough to deserve it.

Claim it

All 50 states and the District of Columbia have unclaimed real estate programs. Combined, they return about $3 billion annually to consumers, says Misha Werschkul, executive director of the Washington State Budget and Policy Center.

Werschkul says it can be difficult to find the owners of unspent gift cards, but the growing number of digital cards that name the recipient is helping. State unclaimed property agencies jointly operate the website MissingMoney.com, where consumers can search by name to find unclaimed property owed to them, including gift card cash.


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