Have you ever wondered what happens to billions of unused gift cards every year? Gift cards, often deemed perfect stocking stuffers, are expected to top sales charts this holiday season. The National Retail Federation projects nearly $30 billion spent on these convenient presents, with restaurant gift cards leading the pack. However, what becomes of these cards when they go unused, amounting to tens of billions of dollars each year, remains a largely untold story.
Despite good intentions, many gift cards end up lost, forgotten, or saved for a special occasion that never comes. Bankrate's July survey revealed a staggering statistic: "47% of U.S. adults had at least one unspent gift card or voucher with an average value of $187." This sums up to an unused total of about $23 billion.
A significant change occurred in 2010 with the enactment of federal law, ensuring a gift card's validity for at least five years.
Yet, as Ted Rossman, a senior industry analyst at Bankrate, points out, "Differing state laws are one reason many stores have stopped using expiration dates altogether."
However, the story doesn't end there. "Every year, big companies calculate 'breakage,' which is the amount of gift card liability they believe won't be redeemed based on historical averages," a strategy that notably benefits companies like Starbucks, which reported substantial revenue from breakage in 2022.
The journey of an unspent gift card varies by state. In many cases, these funds revert to state unclaimed property programs, which then attempt to return the money to consumers. Misha Werschkul, the executive director of the Washington State Budget and Policy Center, elaborates on the complexity of this process. "It can be tricky to find the holders of unspent gift cards," Werschkul says, acknowledging the value of digital cards in easing this challenge.
The consumer finance landscape also accommodates those wishing to convert unwanted gift cards into cash. Rossman mentions sites like CardCash and Raise, where "resale sites won't give you face value for your cards, but they will typically give 70 to 80 cents per dollar."
An increasing concern in the realm of gift cards is the prevalence of scams. The Federal Trade Commission's alarming data from 2022 indicates that thousands of consumers were defrauded of over $228 million through gift card scams. These scams often start with convincing communications, urging quick decisions, and exploiting the convenience of gift cards for fraudulent gains.
For victims, the FTC advises immediate reporting to the card issuer and attempting to recover the funds. Some issuers have been proactive, flagging suspicious transactions and freezing funds to mitigate losses.
Gift cards, while a popular and convenient gift choice, carry complexities and risks often overlooked by consumers. The unused billions represent not just forgotten potential gifts but also a significant financial and legal maze involving retailers, states, and consumers. As the holiday season ramps up, the importance of awareness around the usage, laws, and potential scams associated with gift cards cannot be overstated. With billions at stake, the humble gift card holds more weight than its plastic composition suggests.