Uncovering the Mystery of Unspent Gift Cards: What Happens to Billions Left Unused Every Year

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During this holiday season, Americans are projected to collectively invest nearly $30 billion in gift cards, as reported by the National Retail Federation. Interestingly, a significant portion of these cards will never fulfill their intended purpose, ultimately leading to a complex journey involving expiration dates and inactivity fees that can vary depending on your location.

Gift cards, regarded as the second most popular gift after clothing this season, are expected to be exchanged by nearly half of all Americans, according to the National Retail Federation. However, a substantial number of these cards will remain unclaimed. Whether they get lost in the shuffle, forgotten in a drawer, or held onto for a special occasion, a July survey by the consumer finance company Bankrate found that 47% of U.S. adults possess at least one unused gift card or voucher, with an average value of $187, amounting to a staggering $23 billion nationwide.

Federal regulations enacted in 2010 stipulate that gift cards must remain valid for at least five years from the purchase date or the last time they were loaded with funds. Some states, such as New York, extend this period even further, ensuring that cards remain valid for up to nine years. Consequently, many retailers have opted to abandon expiration dates altogether, owing to the varying state laws, according to Ted Rossman, a senior industry analyst at Bankrate.

While it may take several years for gift cards to officially expire, financial experts recommend using them promptly. Some cards, particularly generic cash cards from Visa or MasterCard, start accumulating inactivity fees after just one year of disuse, eroding their value over time. Additionally, inflation can further diminish their worth. Moreover, if a retail store were to close or declare bankruptcy, any gift card issued by that establishment would become worthless. To prevent these scenarios, consider making use of your gift cards on National Use Your Gift Card Day, an event established by a public relations executive and endorsed by numerous retailers, with the next one scheduled for January 20, 2024.

If you find yourself in possession of an unwanted gift card, there is an alternative: selling it on platforms like CardCash or Raise. While these resale sites typically won’t offer the full face value of the card, you can still expect to receive around 70 to 80 cents per dollar.

But what exactly happens to the money when a gift card goes unused? The answer hinges on the state in which the retailer is incorporated. When you purchase a gift card, the retailer can utilize that money immediately. However, it also becomes a financial obligation, as the retailer must account for the possibility that the gift card may eventually be redeemed. Each year, large corporations calculate “breakage,” which represents the amount of gift card liability they anticipate will never be redeemed, based on historical averages. For certain companies, such as Starbucks, this breakage becomes a substantial source of profit, with the coffee giant reporting $212 million in breakage revenue in 2022.

Nonetheless, in at least 19 states, including Delaware, where many major corporations are headquartered, retailers are obligated to collaborate with state unclaimed property programs. This partnership ensures that money from unused gift cards is returned to consumers. Any funds not claimed by individuals are allocated to public service initiatives, as these states maintain that companies should not be entitled to money they have not earned through providing a service.

It is essential to note that all 50 states and the District of Columbia operate unclaimed property programs, collectively returning approximately $3 billion to consumers each year, according to Misha Werschkul, the executive director of the Washington State Budget and Policy Center. While tracking down the rightful owners of unused gift cards can be challenging, the increasing prevalence of digital cards that include recipient names can aid in this endeavor. State unclaimed property offices jointly maintain the website MissingMoney.com, where individuals can search for unclaimed property, including cash from gift cards, by entering their names.

Frequently Asked Questions (FAQs) about Unspent Gift Cards

More about Unspent Gift Cards

• National Retail Federation
• Bankrate
• Federal gift card regulations
• National Use Your Gift Card Day
• CardCash
• Raise
• Starbucks breakage revenue
• State unclaimed property programs