Gift cards are great stocking stuffers, as long as you don't put them in a drawer and forget about them after the holidays. Americans are expected to spend more than $27.233 billion (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.
After clothing, gift cards will be the most popular gift this holiday season. Nearly half of Americans plan to donate them, according to the National Retail Federation. But many will remain unspent. Gift cards get lost or forgotten, or recipients hold onto them for a special occasion.
In a survey in July, consumer finance company Bankrate found that 47% of American adults had at least one unspent gift card or coupon. The average value of unused gift cards is 169 euros per person (about $187).
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.
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 makes cards less valuable over time. And if a retail store closes or goes bankrupt, a gift card could be worthless.
If you have a gift card that 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 will usually 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 in which the retailer is incorporated. When you purchase a gift card, a retailer can use that money right away.
But it also becomes a liability: The retailer has to plan for the possibility of the gift card being redeemed. Each year, large companies calculate "churn," 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 big driver of profits. Starbucks reported €192.51 million ($212 million) in breakage revenue in 2022.
In several states, money that is not recovered by individual consumers is spent on public service initiatives. In the opinion of the states, it should not go to companies because they have not provided a service to earn it. All 50 states and the District of Columbia have unclaimed property programs. Combined, they return about €2.724 billion (about $3 billion) to consumers annually, says Misha Werschkul, executive director of the Washington State Budget and Policy Center.
