Breakage

AAA

DEFINITION of 'Breakage'

Revenue gained by retailers through unredeemed, expired or lost gift cards. Breakage refers to money received from gift cards but never redemeed by customers. In 2006 it was estimated that consumers lost over $8 billion annually due to breakage. Most retailers no longer place restrictions (i.e. dormancy fees, expiration dates, etc.) on their gift cards to eliminate the accounting uncertainty they create.

INVESTOPEDIA EXPLAINS 'Breakage'

In 2007 the FTC settled a case it brought against Darden Restaurants for failure to disclose its gift cards dormancy fees and reached the same outcome in similar action it filed against Kmart. The rulings required both companies to reimburse customers who lost money due to the inadequately disclosed gift card fees.

RELATED TERMS
  1. Economic Indicator

    A piece of economic data, usually of macroeconomic scale, that ...
  2. Chain Store Sales

    An indicator that provides information on the monthly sales volumes ...
  3. Federal Trade Commission - FTC

    An independent federal agency whose main goals are to protect ...
  4. Retail Sales

    An aggregated measure of the sales of retail goods over a stated ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  6. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Investing

    Choosing The Winners In The Click-And-Mortar Game

    E-tailing has changed the way consumers do nearly everything. Do you know how to pick the best retailer?
  3. Markets

    Consumer Spending As A Market Indicator

    What people buy and where they shop can provide valuable information about the economy.
  4. Fundamental Analysis

    Analyzing Retail Stocks

    To analyze retail stocks, investors need to be aware of the most common metrics used. Find out what they are.
  5. Options & Futures

    Are Structured Retail Products Too Good To Be True?

    Spot a rotten investment before you get seduced by its sweet promise of profit.
  6. Investing

    Doing More With Less: The Sales-Per-Employee Ratio

    If used properly, this ratio can give you insight into a company's productivity and financial health.
  7. Savings

    Why Do Credit Cards Expire?

    Credit cards expire for more reasons than you could imagine – including, so you don't forget you have the card.
  8. Credit & Loans

    Meet The Company Behind Your FICO Score

    There are other credit scores that evaluate lending risk, but FICO is still the choice of most U.S. lenders.
  9. Stock Analysis

    How MasterCard Likely Earned a Spot in Your Wallet

    An in depth look at MasterCard and its future prospects as an investment.
  10. Credit & Loans

    6 Ways To Build Credit Without A Credit Card

    It's definitely possible – if a bit more complicated – to build a credit history without traditional credit cards. Just follow these steps.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center