Will Your Gift Card Gift Go Unused?
These days, "gift card malls" are everywhere. Whether at the grocery store, a big box retailer or even the gas station, many retailers now offer a huge selection of merchant gift cards, and in many cases, additional incentives to buy them. According to FirstData, the holiday season accounts for 40% of all gift card activations. (Put one of these unique offerings under someone's tree this year. See 8 Gifts For Financial Geeks.)

IN PICTURES: 8 Easy Ways To Slash Your Holiday Budget

More than 75% of gift-givers will buy a gift card, and Americans will spend an average of $145.61 on them this holiday season, according to a recent survey. And gift cards have a powerful place on wish lists, ranking as the most-wanted gift for the fourth consecutive year.

Gift card givers cite buying gift cards for their convenience (to buy, give and redeem) and the flexibility they offer recipients. Yet, with all this activity, an unbelievable amount of money gets wasted in the form of non-redemption: nearly $5 billion a year, to be exact.

With so many gift card purchases and so little redemption by proportion, what are a gift card giver and gift card receiver to do? Here are some tips to make sure your gift card gift doesn't go to waste.

Stick To The Basics

In early December, GiftCardRescue reported the results of a consumer study on the top 20 most-desired gift cards. For the second year running, Wal-Mart (NYSE:WMT), Amazon (Nasdaq:AMZN) and Target (NYSE:TGT) gift cards ranked in the top three as "most desired". Prepaid credit cards from VISA (NYSE:V), American Express (NYSE:AXP) and MasterCard (NYSE:MA) also ranked high on the list. The common thread that likely makes these gift cards so popular is the purchase versatility and merchandise selection that all of the retailers offer. Stick to these, and you could decrease the odds that your gift card will go unused.

Know Thy Receiver

Often purchased "when in doubt", gift cards commonly change hands among co-workers, neighbors and others on your list that are hard to shop for. But are you giving gift cards to the people that will really redeem them? According to FirstData, teens are the greatest consumers of gift cards; more than half include them on holiday wish lists.

Buy, Sell Or Trade

Suppose that you do receive a gift card to a retailer that you're not crazy about. Good news: you have options!

When the astronomical numbers behind "gift card breakage" (the industry term for unused funds) leaked onto the mainstream, online services sprouted to offer consumers a way to "reclaim" their consumer gift card power. These sites allow users to trade gift cards with other individuals, buy them at a discount from various retailers or sell them. And while many are just now finding out about these sites, consumers are rapidly joining the gift card bandwagon to claim what is rightfully theirs.

Odysseas Papadimitriou, CEO of CardHub, one such service that recently launched, shared that his service already has "30,000 monthly users so far". And the trend is expected to continue. According to Papadimitriou, "The outlook for this service is 50 to 100 percent year-to-year growth."

Give To A Cause

Feeling generous? Give your unwanted gift card to charity. You can gift the card directly to a local organization, or online at a site like DonorsChoose.org, which "gifts the full face value of cards to needy schools". Not only will your funds go to a deserving cause, your donation may be tax-deductible. (There are many things to consider when it comes to this type of charitable giving. Make sure you're well informed. Check out Gifting Your Retirement Assets To Charity.)

What Happens To Your Unused Gift Card?

Suppose that you have a gift card that goes unused. What happens to your money? In some cases, it goes back to the issuing retailer. In 2009, Home Depot (NYSE:HD) reported $37 million in revenue from unused gift-card credits.

You might be surprised to hear of another unlikely group more than happy to claim your unused gift cards. According to the Office of the New York State Comptroller, after five years of dormancy, a gift card is considered "abandoned property" and is up for grabs by the state. This policy accounted for $9.6 million in unredeemed gift cards for the state of New York. Other states are attempting to follow suit. South Carolina considered legislation in 2009 giving it the right to collect unclaimed gift card balances; Texas considered a similar measure. The policy for unused gift cards varies, but if unclaimed after a stated period of time, the funds can be recognized as income.

IN PICTURES: 9 Ways To Trim The Fat From Your Spending

The Bottom Line

Gift cards are big business for buyers, receivers and some unlikely entities looking to cash in on the action. Know your options when it comes to gift cards, and ensure that your hard-earned cash goes to a person you feel good about rewarding (even if "that person" is you)! (Use this vehicle to make sure your payout lasts as long as you do. Read Live Longer, Retire Younger: Can You Do It?)

For the latest financial news, see Water Cooler Finance: FBI Insider-Trading Bust.





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