Gift cards can be the perfect stocking stuffer, assuming people remember to use them.
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 those sales. Most of those gift cards will be redeemed. Paytronix, which tracks restaurant gift card sales, says about 70% of gift cards are used within six months.
But many cards (worth tens of billions of dollars) end up forgotten or unused. That's when life with a gift card gets more complicated, with expiration dates or inactivity fees that can vary by state. Here's what you need to know about the gift cards you give or receive.
Average unspent per card
After clothing, gift cards will be the most popular gift this holiday season. Nearly half of Americans plan to give them away, according to the National Retail Federation.
But many will remain unspent. 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 American adults had at least one unspent gift card or voucher with a median value of $187. That's a total of 23 billion dollars.
Under a federal law that went into effect in 2010, a gift card cannot expire for five years from the time it was purchased or from the last time someone added money to it. Some state laws require an even longer period. In New York, for example, any gift cards purchased after December 10, 2022 cannot expire for nine years.
Differing state laws are one reason many stores have stopped using expiration dates altogether, says Ted Rossman, senior industry analyst at Bankrate.
Beware of inactivity fees
While gift cards can take years to expire, experts say it's still wise to spend them quickly. Some cards, especially generic Visa or MasterCard cash cards, will begin to accrue 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 could be worthless.
Maybe consider emptying your stash on National Use Your Gift Card Day, a five-year-old holiday created by a public relations executive and now supported by several retailers. The next one is January 20, 2024.
If you have a gift card you don't want, one option is to sell it on a site like CardCash or Raise. Rossman says resale sites won't give you the face value of their cards, but they will typically give you between 70 and 80 cents on the dollar.
What happens to the money when a gift card is not used? It depends on the state where the retailer is incorporated.
When you buy a gift card, a retailer can use that money right away. But it also becomes a burden; The retailer should plan for the possibility of the gift card being redeemed.
Some consumers get their money back
Each year, large companies calculate “breakage,” which is the amount of gift card liability they believe will not be redeemed based on historical averages. For some companies, like Seattle-based Starbucks, breakage is a huge source of profit. Starbucks reported $212 million in breakage revenue in 2022.
But in at least 19 states (including Delaware, where many large businesses are incorporated) retailers must work with state unclaimed property programs to refund consumers for unspent gift cards. The money that individual consumers do not get back is spent on public service initiatives; From the states' point of view, it shouldn't go to companies because they haven't provided a service to earn it.
All 50 states and the District of Columbia have unclaimed property programs. Combined, they return about $3 billion to consumers annually, says Misha Werschkul, executive director of the Washington State Budget and Policy Center.
Werschkul said it can be difficult to find holders of unspent gift cards, but the growing number of digital cards that name the recipient helps. The state unclaimed property offices jointly operate the website MissingMoney.com, where consumers can search by name for any unclaimed property owed to them, including cash for gift cards.
Beyond simply monitoring their gift cards so they don't go to waste, consumers also need to keep something else in mind: how not to get scammed. In 2022, almost 65,000 consumers were scammed in more thanaccording to the Federal Trade Commission.
Scammers may start with a phone call, text message, email, or direct message on a social media platform, often posing as a legitimate business, charity, government agency, or other organization, and then times, posting as a friend or family member. A common tactic is to pressure people to make a quick decision by urging them to purchase one or more gift cards and then instructing consumers to give them the card numbers or send them a photo.
As the holiday shopping season approached in November, for example,about an increase in scams targeting members of its popular Prime club. The schemes involved criminals posing as customer service representatives for online retailers and sending shoppers attachments suggesting their accounts would be suspended if they did not take action. The emails included a link requesting members' login credentials or payment information, which the scammers then steal.
So can you do it if you get caught? First, report the incident to the gift card issuer, which is typically the company where the card would be redeemed, such as Amazon, Apple, Target, Walmart, and others.
Second, see if you can recover your funds, as some companies are detecting fraudulent transactions and freezing gift card funds. If a scammer hasn't used up the card yet, the company may be able to return the funds, according to the FTC.
Third, report any scams to the agency on Report fraud.ftc.gov.
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