Unwrapping the Mystery: The Fate of Unused Gift Cards Each Year
Gift cards are great gifts until you forget that you have them. According to the National Retail Federation, Americans are projected to spend nearly $30 billion on gift cards this holiday season, with restaurant gift cards leading at one-third of total sales.
While many gift cards will be redeemed, tracking by Paytronix, which focuses on restaurant gift card sales, indicates that approximately 70% of gift cards are use within six months. However, tens of billions of dollars often go unused, introducing complexities like expiration dates and inactivity fees that vary by state.
After clothing, gift cards are expected to be the second most popular holiday present, with almost half of Americans planning to give them, per the National Retail Federation. A July survey by Bankrate found that 47% of U.S. adults had at least one unused gift card, totaling $23 billion.
Some gift cards may have expiration dates.
Federal law protects gift cards from expiring for five years, with some states extending this further. For instance, cards purchased after Dec. 10, 2022 in New York can’t expire for nine years. Differing state laws have prompted many stores to abandon expiration dates altogether, per Bankrate.
Certain cards, especially generic cash cards like Visa or MasterCard, may incur inactivity fees after a year, diminishing their value. Inflation and the closure of a retail store can also render a gift card worthless. For those with unwanted gift cards, selling them on platforms like CardCash or Raise is an option, though at a discounted rate of 70 to 80 cents per dollar on certain resale websites.
When consumers purchase gift cards, retailers gain immediate access to the funds, which also introduces a liability. Retailers must anticipate the possibility of the gift card being redeemed. Annually, major companies calculate “breakage,” representing the amount of gift card liability expected to go unredeemed based on historical patterns. Restaurant Business reported that Starbucks had $212 million in revenue from breakage in 2022.
Unclaimed funds from gift cards.
In at least 19 states where many major companies are incorporated, retailers must collaborate with a state’s unclaimed property programs. These programs facilitate the return of money from unused gift cards to consumers. Unclaimed funds not recovered by individuals are directed toward public service initiatives.
Across all 50 states and the District of Columbia, unclaimed property programs are in place. The MissingMoney.com website, jointly managed by state unclaimed property offices, allows consumers to search for any unclaimed property, including cash from gift cards, by name.
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