These days, gift card malls are everywhere – at grocery stores, big-box retailers and even gas station. Many retailers now offer a huge selection of merchant gift cards, and in many cases, additional incentives to buy them. A large part of gift card activations is during the holiday season. (Put one of these unique offerings under someone's tree this year – read about eight gifts for financial geeks.)
Many gift-givers will buy a gift card, and gift cards have a powerful place on wish lists, ranking as the most-wanted gift. Gift card givers buy 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 ($1 billion, 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.
Gift Card Basics
Per Amazon (Nasdaq: AMZNAMZN), the most wished for gift cards include Amazon gift cards, followed by Starbucks and Ulta. Prepaid credit cards from VISA (NYSE: V) also ranked high on the list, along with Apple's iTunes, Sephora and Lowe's.
The common characteristic that likely makes these gift cards so popular is the purchase versatility and merchandise selection that all of the retailers offer. Sticking to these will decrease the odds that the gift card will go unused.
Understand the Gift Receiver
Gift cards are often when the buyer is in doubt, commonly changing hands among co-workers, neighbors, and others that are hard to shop for. But the gift card giver might not be giving gift cards to the people that will really redeem. For example, teens are large consumers of gift cards, with many including it on their holiday wish lists.
Trade in Gift Cards
If you receive a gift card to a retailer that you're not crazy about, there's 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.
Give to a Cause
Feeling generous? Cardholders can give their unwanted gift card to charity. You can gift the card directly to a local organization, or online at a site like DonorsChoose.org, which gives the face value of gift cards to schools in need. Not only will the funds go to a deserving cause, but the donation may also be tax-deductible. (There are many things to consider when it comes to this type of charitable giving. To make sure you're well informed, read about gifting your retirement assets to charity.)
Unused Gift Card Fate
Suppose there's a gift card that goes unused. What happens to your money? In some cases, it goes back to the issuing retailer. One 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 $14.6 million in unredeemed gift cards for the state of New York during the fiscal year 2016-17. Other states have similar laws.
The Bottom Line
Gift cards are big business for buyers, receivers and some unlikely entities looking to cash in on the action. Know the options when it comes to gift cards, and ensure that any hard-earned cash goes to a person that will appreciate it. You can use this vehicle to make sure your payout lasts as long as you do – read about living longer and retiring younger. (For the latest financial news, read about the FBI insider-trading bust.)