The Secret Life of Gift Cards: Here’s What Happens to the Billions That Go Unspent Every Year

Americans are expected to spend nearly $30 billion on gift cards this holiday season.

Gift cards make 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 nearly $30 billion on gift cards this holiday season, according to the National Retail Federation. Restaurant gift cards are the most popular and represent a third of sales.

Most of these gift cards are 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 – are forgotten or otherwise unused. That’s when the life of a gift card becomes 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):

BELOVED, BUT LOST

After clothing, gift cards are the most popular gift this holiday season. According to the National Retail Federation, nearly half of Americans plan to give them.

But many of them will remain unused.

Gift cards get lost or forgotten, or the recipients save them for a special occasion. In a July survey, consumer finance company Bankrate found that 47% of American adults had at least one unused gift card or voucher with an average value of $187. That’s a total of $23 billion.

THE GIFT OF TIME

Under a federal law that took 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. For example, in New York, a gift card purchased after December 10, 2022 cannot expire for nine years.

Different state laws are one reason why many stores no longer have expiration dates at all, says Ted Rossman, a senior industry analyst at Bankrate.

USE IT OR LOSE IT

Although gift cards can take years to expire, experts say it’s still wise to spend them quickly. Some cards (especially generic Visa or MasterCard debit cards) will charge inactivity fees if they aren’t used for a year, which eats away at their value. Inflation also makes cards less valuable over time. And if a store closes or goes out of business, a gift card can be worthless.

Maybe consider clearing out your inventory on National Use Your Gift Card Day, a five-year-old holiday created by a PR executive and now supported by multiple retailers. The next one is January 20, 2024.

OR SELL IT

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 don’t give you face value for your cards, but typically give you 70 to 80 cents on the dollar.

THE MONEY TRAIL

What happens to the money if a gift voucher remains unused? It depends on the state in which the retailer is located.

When you purchase a gift card, a retailer can use that money right away. But it also becomes an obligation; the retailer must take into account the possibility of the gift card being redeemed.

Every year, major companies calculate “breakage,” the amount of gift cards they believe will not be redeemed based on historical averages. For some companies, like Seattle-based Starbucks, breakage is a huge profit driver. Starbucks reported $212 million in breakage revenue in 2022.

But in at least nineteen states — including Delaware, where many major companies are based — retailers must work with state unclaimed property programs to return money from unused gift cards to consumers. Money not recovered by individual consumers is spent on public service initiatives; According to the states, the money should not go to companies because they have not provided a service to earn it.

CLAIM IT

All 50 states and the District of Columbia have unclaimed property programs. Combined, they return about $3 billion to consumers annually, said Misha Werschkul, executive director of the Washington State Budget and Policy Center.

Werschkul says it can be difficult to find the holders of unused gift cards, but the growing number of digital cards with the recipient’s name is helping. State unclaimed property offices jointly operate the website MissingMoney.com, where consumers can search by name for unclaimed property they are entitled to, including cash from gift cards.