$41 Billion in Gift Cards Go Unspent

From Real Time Economics Blog at Wall Street Journal online:  

$41 Billion: The total amount of money on gift cards that went, or is likely to go, unspent from 2005 to 2011.

Gift cards are becoming an increasingly popular holiday present, but... what happens to money that goes unspent?

The vast majority of money put on gift cards gets redeemed, but ... since 2005 $41 billion in money on gift cards has been lost or is likely never to be cashed in.

The lion’s share of money lost on gift cards from 2005-2009 came from fees and expiration dates.  All that changed with the Credit Card Accountability Responsibility and Disclosure Act. The Act largely forbids fees on cards sold by retailers (cards given away as promotional items can still charge fees), and it prohibits expiration dates less than 5 years after the card is purchased.

But what happens when the purchases go under the face value and then sit in the junk drawer in perpetuity, or when grandma, who can barely check her AOL email, gets an Amazon.com card that she’ll never redeem?

The SEC allows companies to take unused gift-card money as income once they can reasonably say the card won’t be redeemed, but there’s no set time limit....

But some states don’t allow companies to keep unused gift-card cash. They demand that companies give the money to the state after a certain period of time to add to unclaimed-funds accounts.

States claim this is a way to reunite consumers with their unspent money, but practically it’s a way for cash-strapped governments to give themselves more liquid funds. Money the state holds as unclaimed funds can be used for general purposes until someone claims it.

For example, in 2008 ... New York state collected $9.6 million in unredeemed gift cards and returned around $2,150 to the rightful owners.

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Link: http://blogs.wsj.com/economics/2011/12/24/number-of-the-week-billions-in-gift-cards-go-unspent