Be sure to spend your gift card

Number of the Week: Billions in Gift Cards Go Unspent


The retail industry also has many reasons to embrace them. Stores can’t count money received from the gift givers who purchase the cards as revenue until they’re redeemed, but this offers a number of benefits. First, it sets up a source of cashflow in the weeks after the holidays as recipients make their way to stores to spend the money on their cards.

Gift-card redemptions also often further add to retailers’ coffers. As anyone who’s used iTunes can attest, it’s awfully hard to spend exactly $15 or $25 on items that cost 99 cents or have sales tax added. Analyst Brian Riley of TowerGroup estimates that more than a third of gift-card purchases go over the face value of the card.

The vast majority of the money put on gift cards gets redeemed, but Riley estimates that since 2005 $41 billion in money on gift cards has been lost or is likely never to be cashed in. The lion’s share of money lost on gift cards from 2005-2009 came from fees and expiration dates. All that changed with the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 that was signed into law last year. The Act largely forbids fees on cards sold by retailers (cards given away as promotional items can still charge fees), and it prohibits expiration dates less than 5 years after the card is purchased.

Comment: We gave some this year (Wells Fargo Visa gift cards). I received a $ 25 gift card to Outback steak house from my manager.

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