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.
Did you know that many gift cards go unused? Whether they are lost, forgotten, or saved for a special occasion, a significant number of gift cards remain unspent. According to a survey conducted by the consumer finance company Bankrate in July, 47% of U.S. adults have at least one unspent gift card or voucher. On average, these unused cards have a value of $187, resulting in a total of $23 billion left unused.
To protect consumers, a federal law was implemented in 2010 that prevents gift cards from expiring for five years from the date of purchase or the last time money was added to the card. Some states have even longer expiration periods. For example, in New York, gift cards purchased after December 10, 2022, cannot expire for nine years.
The variations in state laws regarding expiration dates have led many stores to eliminate expiration dates altogether, according to Ted Rossman, a senior industry analyst at Bankrate.
Be aware of inactivity fees
Although gift cards may take years to expire, experts advise spending them promptly. Certain cards, especially generic cash cards from Visa or MasterCard, may start accumulating inactivity fees if they are not used within a year, diminishing their value. Inflation also reduces the value of gift cards over time. Additionally, if a retail store closes or goes bankrupt, a gift card may become worthless.
Consider taking advantage of National Use Your Gift Card Day, a holiday created five years ago by a public relations executive and now supported by multiple retailers. The next occurrence of this holiday is on January 20, 2024.
If you have a gift card that you don't want, you have the option to sell it on websites like CardCash or Raise. These resale sites may not give you the full face value of the card, but they typically offer around 70 to 80 cents per dollar.
What happens to the money on unused gift cards? The answer depends on the state where the retailer is incorporated.
When you purchase a gift card, the retailer can immediately use that money. However, it also becomes a liability for the retailer, as they have to account for the possibility that the gift card will be redeemed.
Some consumers receive money back
In at least 19 states, including Delaware where many large companies are incorporated, retailers are required to work with state unclaimed property programs to return money from unused gift cards to consumers. If individual consumers do not claim the money, it is then used for public service initiatives. The states believe that this money 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. Together, they return approximately $3 billion to consumers each year, according to Misha Werschkul, the executive director of the Washington State Budget and Policy Center.
According to Werschkul, locating the holders of unspent gift cards can be challenging. However, the increasing use of digital cards that specify the recipient's name has made it easier. State unclaimed property offices manage MissingMoney.com, a website where consumers can search for any unclaimed property, including cash from gift cards, by entering their names.
Be cautious when buying
In addition to keeping track of their gift cards to avoid wasting them, consumers should also be wary of scams. In 2022, the Federal Trade Commission reported that over $228 million was lost by nearly 65,000 consumers in gift card scams.
Scammers often initiate contact through phone calls, texts, emails, or direct messages on social media platforms. They may pose as legitimate businesses, charities, government agencies, organizations, or even friends or family members. One common tactic is to pressure people into making quick decisions, urging them to purchase gift cards and then providing the scammers with the card numbers or sending photos of the cards.
As the holiday shopping season approached in November, Amazon issued a warning about a surge in scams targeting members of its Prime club. Criminals impersonated customer service representatives and sent emails with attachments, claiming that members' accounts would be suspended if they didn't take immediate action. The emails included a link that asked for login credentials or payment information, which the scammers would then steal.
Another step you can take is to try and recover your funds. Some businesses are now identifying fraudulent transactions and freezing the funds on gift cards. If the scammer hasn't used up the card's balance yet, the company might be able to refund the money to you, as stated by the FTC.
Furthermore, it's important to report any fraudulent activities to the agency. You can do so by visiting ReportFraud.ftc.gov.
