Gift cards can make for the perfect Christmas 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, making up one-third of those sales. Most of those gift cards will be redeemed. Paytronix, which tracks restaurant gift card sales, says around 70% of gift cards are used within six months.
But many cards — tens of billions of dollars’ worth — wind up forgotten or otherwise unused. That’s when the life of a gift card gets more complicated, with expiration dates or inactivity fees that can vary by state. Here’s what to know about the gift cards you’re giving — or getting.
Average unspent per card
After clothing, gift cards will be the most popular present this holiday season. Nearly half of Americans plan to give them, according to the National Retail Federation.
But many will remain unspent. Gift cards get lost or forgotten, or recipients hang on to them for a special occasion. In a July survey, the consumer finance company Bankrate found that 47% of U.S. adults had at least one unspent gift card or voucher with an average value of $187. That’s a total of $23 billion.
Under a federal law that went into effect in 2010, a gift card can’t 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 instance, any gift card purchased after Dec. 10, 2022, can’t expire for nine years.
Differing state laws are one reason many stores have stopped using expiration dates altogether, says Ted Rossman, a senior industry analyst at Bankrate.
Beware inactivity fees
While it may take gift cards years to expire, experts say it’s still wise to spend them quickly. Some cards — especially generic cash cards from Visa or MasterCard — will start accruing inactivity fees if they’re not used for a year, which eats away at 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.
Perhaps consider clearing out your stash on National Use Your Gift Card Day, a five-year-old holiday created by a public relations executive and now backed by multiple retailers. The next one is Jan. 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 face value for your cards, but they will typically give 70 to 80 cents per dollar.
What happens to the money when a gift card goes unused? 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 liability; the retailer has to plan for the possibility that the gift card will be redeemed.
Some consumers get money back
Every year, big companies calculate “breakage,” which is the amount of gift card liability they believe won’t be redeemed based on historical averages. For some companies, like Seattle-based Starbucks, breakage is a huge profit-driver. Starbucks reported $212 million in revenue from breakage in 2022.
But in at least 19 states — including Delaware, where many big companies are incorporated — retailers must work with state unclaimed property programs to return money from unspent gift cards to consumers. Money that isn’t recovered by individual consumers is spent on public service initiatives; in the states’ 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 around $3 billion to consumers annually, says Misha Werschkul, the executive director of the Washington State Budget and Policy Center.
Werschkul said it can be tricky to find the holders of unspent gift cards, but the growing number of digital cards that name the recipient helps. State unclaimed property offices jointly run the website MissingMoney.com, where consumers can search by name for any unclaimed property they’re owed, including cash from gift cards.
Buyer beware
Beyond simply keeping tabs of their gift cards so they don’t go to waste, consumers should also keep something else in mind — how not to get ripped off. In 2022, nearly 65,000 consumers were swindled out of more than $228 million in gift card scams, according to the Federal Trade Commission.
Scammers may start with a phone call, text, email or direct message on a social media platform, often purporting to be a legitimate business, charity, government agency or other organization and sometimes posting as a friend or family member. A common tactic is to press people into a quick decision, urging people to buy one or more gift cards and then instructing consumers to give them the numbers on the card or to send a photo.
As the holiday shopping season was gearing up in November, for example, Amazon warned about a spike in scams targeting members of its popular Prime club. The schemes involved criminals posing as customer service representatives with the online retailers and sending shoppers attachments suggesting their accounts would be suspended if they don’t take action. The emails included a link asking for members’ login credentials or payment information, which the scammers then steal.
So can you do if get taken? First, report the incident to the gift card issuer, which is usually the company where the card would be redeemed, such as Amazon, Apple, Target, Walmart and others.
Second, see if you can get your funds back, as some companies are flagging fraudulent transactions and freezing gift card funds. If a scammer has not yet drained the card yet, the company may be able to return funds to you, according to the FTC.
Third, report any scams to the agency at ReportFraud.ftc.gov.