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, 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.

Related Articles
  1. Investing Basics

    10 Companies That Yuppies Love

    Learn about 10 companies loved by the modern Yuppie, including how this demographic's impressive buying power has boosted these companies' earnings.
  2. Investing News

    How 'Honesty' Could Pay off for Jessica Alba

    Is it possible that Jessica Alba is one of the savviest businesswomen on the planet?
  3. Personal Finance

    Invest in Costco? First Understand Its Balance Sheet

    A strong balance sheet sets a company apart and boosts investor confidence. How healthy is Costco based on an analysis of its balance sheets from the last two years?
  4. Investing Basics

    The 5 Reasons Why RadioShack Went Out of Business

    Learn five reasons why RadioShack went bankrupt: store concentration, online competition, product concentration, management issues and financial missteps.
  5. Stock Analysis

    J.C. Penney: Identity Crisis or Buy Opportunity?

    With so many recent leadership changes, J.C. Penney might be suffering from an identity crisis. Here's why and what you need to know.
  6. Stock Analysis

    The Logic Behind Sears' REIT

    Learn what strategy Sears employed with the divestment of its 266 real estate properties to a separate real estate investment trust.
  7. Stock Analysis

    How Nike (NKE) Continues to 'Do It'

    Other than style, do sneakers from any maker really differ that much? That's debatable. But this is certain: Nike sets the standard for selling an image.
  8. Investing Basics

    Why You Might Buy Your Next Car from Costco

    Costco, one of the strongest retailers around, has its hooks in all sort of sectors, including autos.
  9. Professionals

    Are These the 10 Best Stocks in the World?

    Most of the top 10 stocks in the world have performed exceptionally well over the past several years. Here's a look at their future prospects.
  10. Stock Analysis

    Will Revolutionize Shopping? has arrived and will look to steal market share from Amazon over the next several years. Will it be successful?
  1. Substitute

    A product or service that a consumer sees as comparable. If prices ...
  2. Fast Fashion

    Definition of "fast fashion."
  3. Duty Free

    Goods that international travelers can purchase without paying ...
  4. Online-To-Offline Commerce

    A business strategy that draws potential customers from online ...
  5. Chargeback Period

    The timeframe during which a credit card issuer can dispute with ...
  6. Fast-Moving Consumer Goods (FMCG)

    These are consumer goods products that sell quickly at relatively ...
  1. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  2. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  3. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  4. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  5. What factors make it difficult to compare performance ratios between retail stocks?

    Companies that operate in the retail sector significantly differ in terms of their profitability and efficiency, making stock ... Read Full Answer >>
  6. Which socially responsible retailers appeal most to ethical investors?

    Ethical investors have many reasons to consider companies in the retail sector. The sector is broad and features an abundance ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!