What Happens to Billions in Unspent Gift Cards

Introduction

Hello, corporate professionals! Have you ever received a gift card that you never used? You're not alone. In the U.S., about $3 billion in gift card cash goes unspent every year. Let's delve into the fascinating world of unspent gift cards and find out where all that money goes.

The Gift Card Phenomenon 🛍️

The U.S. is the world's largest market for gift cards. In 2019, consumers spent nearly $98 billion on gift cards from brands like Starbucks, Amazon, and Home Depot. However, a significant portion of this money ends up forgotten in wallets or drawers.

Why Do Companies Love Gift Cards?

1. Brand Loyalty: Gift cards build brand loyalty and drive foot traffic.
2. Consumer Spending: People often spend more than the gift card value.
3. Deferred Revenue: Companies can hold onto the cash until the card is redeemed.

The Concept of Breakage 💔

Breakage is the term used for the money left on a gift card that goes unredeemed. Typically, this happens after a period of five years from the date of purchase or last use. Companies can claim a portion of this money as breakage revenue.

Breakage Revenue in Numbers

• Starbucks: Over $140 million in 2019
• Nordstrom: $17 million in 2019
• Cheesecake Factory: $8 million in 2019

Legal Obligations and Consumer Rights ⚖️

In some states, companies have a legal obligation to return unspent gift card money to the buyer. A 2009 federal law also stipulates that most gift cards cannot expire within five years from the date they were activated.

State Governments Step In

• New York: Collected over $13 million in unused gift cards in 2019.
• Delaware: Actively claims unspent gift card money.

The Pandemic Effect 🦠

The COVID-19 pandemic has led to an uptick in gift cards for streaming, food delivery, and gaming. With many retailers struggling, gift cards provide them with much-needed liquidity.

Resale Market 🔄

Sites like Cardpool and Raise allow consumers to sell unwanted gift cards. The resale value generally ranges from 70% to over 90%, depending on the card's popularity.

Conclusion 🎯

Unspent gift cards are a goldmine for retailers, but they also present a complex set of challenges involving consumer rights and state laws. As corporate professionals, understanding these intricacies can help us make informed decisions in our roles.

Quick Takeaways 📝

• Gift cards are a win-win for consumers and retailers but can lead to billions in unspent money.
• Breakage revenue is a significant income source for companies.
• Legal obligations and state laws add complexity to the issue.