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Gift Cards: Customers Lost $8 Billion Last Year

This article was written by in Consumer. 13 comments.


Here’s another reason not to give gift cards or certificates as presents this holiday season (or any other time). According to estimates by TowerGroup, $8 billion was lost by consumers last year who let their gift cards go unused — expired, lost, or ignored.

Consumer Reports also says that their latest survey shows that 27% of gift card recipients have not used at least one of the cards received. That’s up from 19% the same time last year.

Gift cardsFrom the company’s perspective, issuing gift cards is a great idea. They receive cash from the purchase of gift cards, but if the cards are never redeemed, they don’t have to move any inventory. From the consumer’s viewpoint, receiving a gift card as a present doesn’t reflect any of their own expenditure, so perhaps people don’t pay much attention to their expiration or loss.

On top of this, some stores charge a fee when you purchase gift cards. My local supermarket charges a $4 to $6 fee for the benefit of purchasing a gift card for the local Best Buy or Borders.

What do you think about gift cards? Do you give them to others as presents? I do sometimes. For example, a coworker recently looked after my cat while I was away, with no expectation of something in return. I felt the right thing to do would be thanking her with a small gift. Now that I know her better, I know of some specific things she would enjoy. At the time, however, we had discussed the new Target that opened nearby. I knew she would be shopping there, so I presented her with a Target gift card. If I didn’t know there was a very strong possibility of her visiting the store in the near future, I would not have taken that path.

How about you?

Avoid gift card pitfalls [Consumer Reports]
Image credit: spike55151

Updated August 9, 2011 and originally published November 12, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar FinanceAndFat

For some reason, I thought gift cards were pretty cool when they started showing up everywhere, but I’ve soured on them lately.

Just yesterday I found a $50 gift card that I received for a gift about two years ago. I’m going to have to go check the balance, but I’m sure it has been reduced by inactivity fees by now- that really sucks!

Why don’t people just give cash?

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avatar Mrs. Micah

I try to let people know that my favorite place for a gift card is Borders, because we go on date nights there. Only if they ask, of course.

I should find something to do with my card from Sears before it expires. There isn’t one in my area, so maybe I should look online….

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avatar The Saving Freak

California has a law against the expiration of gift cards so you or someone you know can take them in to the store in California and get them “recharged” with a new expiration date. This is a great way to make sure you get to use the money on the card.

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avatar Luke Landes ♦127,500 (Platinum)

F&F: I don’t know. Are people concerned that a gift of cash would seem tacky? I don’t think I’d give cash to a friend as a birthday present or to a family member for a holiday unless I knew they had some desperate need… and in that case it wouldn’t be a holiday gift. There is also the option of asking someone what they would like.

Mrs. Micah: Borders is a good store — and I frequently browse and pick a few things up — but I’ve found that $10 at another book store or even Amazon.com will go farther than $10 at Borders.

Freak: I always forget that about California. I’ll keep that in mind; I have family out there. Other states should follow their example.

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avatar H Lee D

I like giving them only if I’m not sure what to get otherwise that the recipient will like. If they end up not spending it, well, it’s not money wasted any more than a gift they pretend to like or can’t use.

Likewise, I prefer to receive them over a knick knack or other thing that someone gets me because they don’t know what else to get. I always spend mine, as I’ve never gotten one to a place where I had nothing to buy.

I don’t like getting them if there’s not enough money on them to buy things in the store they’re for.

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avatar spazz

You can sell unwanted gift cards on ebay – check it out. Seems most cards go for very close to retail. My girlfriend has about 3 years of useless gift cards for like $10 at Victoria’s Secret – what can you buy with that there?!

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avatar Paul

I think the worst kind of gift cards are the ones you have pictured. The ones which are generic Visa or Mastercard debit cards and not gift cards for a specific establishment like Target or Borders.

If you purchase a gift card directly from the store like Best Buy or Target, you normally pay only face value for the card, but when you purchase one of the gift debit cards, you must pay an extra $4-$5 fee in addition to the face value.

The other problem is that many online retailers aren’t setup to handle these debit gift cards if the balance on the card isn’t sufficient to cover the cost of purchase. For example, if I have a Best Buy gift card for $20, but want to buy something for $30, the Best Buy website will apply the gift card towards my purchase and then prompt me for another credit card for the remaining $10. But if I have a debit gift card for $20 and I try to purchase something from BestBuy.com that costs $30, it will decline the entire card. This makes it very hard to use these cards for online purchases.

As far as giving cash being “tacky”: I think this attitude has been pushed on us by retail establishments in recent years. Think about it: why is it considered tacky to write someone a check for $20 which they can use on whatever they need, but it’s perfectly OK to write a check to a store to purchase a $20 gift card that limits the recipient to a particular store (which they may not frequent) and which may expire or be lost?

The only situation I can think of where giving a gift card would be preferable to cash is if you suspect the recipient might waste cash on something like alcohol or drugs. I actually do carry around gift cards to restaurants like McDonalds or Wendys so that I can give these out to panhandlers without worrying that I’m contributing to their habits.

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avatar Me

I typically do not purchase gift cards, but last year I did. I got my newly retired step-mother a 3 month gift certificate for netflix. She has yet to use it. Grrr…. What a waste of money.

I asked my father some suggestions for her for her birthday. He recommended a gift certificate. I asked him if she used her netflix present. Silence….so I asked again. He gave me some ideas.

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avatar Kat

I am happy I live in CA. I don’t have to worry about using my gift card asap.
I personally hate getting them. I hardly ever use them or they are for a place that I don’t shop at.
I try not to give them either.

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avatar Greg

MA has a 7 year expiration requirement. However, regardless of the state you live in, the Federal Regulations, which allow an inactivity fee, trump. So, while the card won’t “expire” you may find that it has nothing on it when you go to use it.

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avatar Mrs. Micah

True, Flexo. We don’t often purchase books from Borders. Instead we drink coffee (using the gift card), skim books and buy them online if they’re cheaper there or from the store next time we come. Or we most often decide to get them from the library. ;) Birthdays are the one exception, we each pick a book.

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avatar matt @ Thrive

“Breakage” is something businesses count on, which is why you see gift cards everywhere: grocery stores, online, you name it. People buy them casually so they don’t have to think about a gift and stores reap the benefit.

It is also true that gift cards make you spend more than the card, on average about $40, according to some studies. So not only are you losing money on the transaction by not always using them, you are always spending your own money to take advantage of the gift. As our writing intern put it, by giving me a gift card, you’re reaching into my pocket and taking out $40.

She blogged about it awhile back: http://blog.justthrive.com/2008/11/note-to-family-friends-i-prefer-cash/

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avatar elsie

I definitely lost money- turns out when I bought the $50 gift card in cash, the guys at the shop forgot to register it so it doesn’t work. And now they have no way of tracing it. so my $50 is part of the $8 or so billion dollars lost THIS year.

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