Breakage

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.

BREAKING DOWN '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. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced ...
  2. Economic Indicator

    An economic indicator is a piece of economic data, usually of ...
  3. Federal Trade Commission - FTC

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

    An indicator that provides information on the monthly sales volumes ...
  5. Retail Sales

    An aggregated measure of the sales of retail goods over a stated ...
  6. Short-Term Debt

    An account shown in the current liabilities portion of a company's ...
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. Stock Analysis

    JCPenney's Path To Profitability (JCP)

    Learn about what J.C. Penney's management team has been doing to profitably grow its business as the company recovers from years of revenue declines.
  8. Economics

    Understanding Cost-Volume Profit Analysis

    Business managers use cost-volume profit analysis to gauge the profitability of their company’s products or services.
  9. Credit & Loans

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  10. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
RELATED FAQS
  1. How can you pay your Walmart credit card?

    Holders of Walmart credit cards can make payments on their balances due by mail, online or at Walmart and Sam's Club stores. ... Read Full Answer >>
  2. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reduce the number of times shoppers and buyers have to pay for goods ... Read Full Answer >>
  3. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  4. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  5. Does QVC accept debit cards?

    QVC accepts debit card payments as one of its many payment options. The company, which is the world’s leading video and e-commerce ... Read Full Answer >>
  6. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  3. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  4. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  5. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  6. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
Trading Center