In case you haven’t been paying attention to multiple consumer warnings about gift cards, consider this your final warning. Best Buy reported a $43 million profit for fiscal year 2006 thanks to gift cards that haven’t been used in two years. Seriously people. Wake up, smell the coffee and check your wallets. Best Buy isn’t the only retailer making a killing off unused gift cards.
A lot of those gift cards get purchased around the holiday season and tons go unused and lost, which results in Best Buy keeping your money for good. Retailers apparently can’t report revenue from gift cards until they’ve either been used or a long period of time has passed since the date of purchase. So this holiday, take inventory and check out the gift cards you’ve accumulated – you might have some serious cash laying around.
Retailers profit from unused gift cards [Yahoo! News]
Someone had that story linked on Digg. I’m sure a portion of that is unusable balance on cards. I’ve thrown away a lot of $50 gift cards after I spend $48.27 on them. I’m sure if I had saved them and added it all up I could have bought a Blues Traveler CD to give to someone I hate, but I figure it’s easier to throw them away then to carry around 16 gift cards with $.38 on each.
Is it true that in CA it is illegal to have a expiration on Gift Certificates?
It is in WA. At least for retailers it is, Mall gift cards and Visa/MC gift cards can depreciate over time but a retailer card from the store can not loose value over time.
I think it ought to be illegal to give gift cards. Further, I think stores that won’t give you your balance back in cash should be egged. I wish some states would start mandating it.
I wonder how many “Archcards” from McDonalds are being passed out this holiday season. Talk about the worst gift card in the history of gift cards.
This is an interesting strategy for enhancing the bottom-line. If you think about it, the US Government has been doing this for more than a century. Billions of dollars in bonds stop earning interest every year (given the time/inflationary reduction in the dollar amount of the origin bond price, this is analogous to an expiring gift card).
The obvious added benefit of an otherwise guaranteed Customer doesn’t hurt (I do not know of any consumer electronics stores that accept their competition’s gift cards…hmmmm, now there’s an idea).
Merry Christmas,
Clay
It would be interesting to have a service that will send you a check for 80% of the value of your Gift Card if you don’t want to use it or there’s not enough left to make it worthwhile. Then aggregate those cards into worthwhile totals for 90% of the market cost.
Then you could splurge and add Johnny Mnemonic to the gift list for the person you hate.
It never ceases to amaze me how much money large retailers make apart from selling products (Replacement Warranty with a 60% profit margin anyone?)
Cobo,
I couldn’t disagree more, gift cards are a great idea (minus loosing your change at the end of the day). At my old job we would recieve a $250 gift card to a the location of our choosing (we had a list of like 20 places). the only tax paid on this was WA state sales tax, had that been a cash bonus it would have been taxed at something 40% for federal income tax. If retailers were to give you cash for the left over balance I’d have taken my $250 Barnes and Nobels card and instead of buying the New Dugeon Master’s Guide I would have bought a $1.50 book mark and bought $248.50 worth of crack rocks.
Andrew- That service is called craigslist.org check it out sometime.
Up in Ontario, Canada all gift cards I’ve seen come with a 1-2 year expiry date on em. This is brilliant marketed by the retailers and imo the cards are excellent gifts to be given. I’d rather not have to return that ugly sweater grandma gave me this year for store credit to be applied somewhere else; with a gift card I can pick out whatever I want the first time.
I don’t have a problem with them putting an expiry on cards either. If you can’t think of something to buy within 1-2 years you deserve to lose out on your gift. Also, I’ve never carried a balance on my cards - in fact I usually overspend on an item and cut down the price by applying the gift card. I guess I’m just the “target audience” for these retailers.
Nothing says “I care about you” like a $20 gift card from Walmart or Best Buy. I have yet to figure out who actually buys these damn things, much less receive one ;-) I have a theory that the underwear gnomes have figured out how to actually make money – moving away from underwear and socks into the gift card business… while you sleep they go through your pockets and resell them at a profit to the black market.
Jon
My favorite is the gift card folks that charge you $7.50 for asking the balance. That takes balls. Let’s cut ‘em off.
Is it just me or does that chick look really scary, like she’ll eat my face???
Thanks for the tip. I just checked my wallet and found a Barnes and Noble card which I think has 40 bucks left and a target card (don’t ask why). This is similar to their mail in rebates. People lose tons and tons of unclaimed money by purchasing things that they don’t need because its “free” after rebates and never send the mail in rebate or never follow up with them. A lot of the times, its because the rebate is a small amount like 5 dollars and its not worth the time and effort, but if you have rebates lying around, go fill them out!
Amit
You just reminded me I have a Circuit City card sitting around. I think the worst part is they start deducting value from the card after 1 year. That’s BS….
I think depreciation of your gift card should actually be banned. It usually has no cash value and the store is guaranteed that they will sell a product to the customer. They already have the money sitting in their bank. Now they also get to “expire” these cards and keep that money. It’s just underhanded. Plus inflation is always occuring so the card’s value goes down while the store has already gotten the money. I think it would be a great campaign to advertise never expiring gift cards.
Amit
I don’t think anyone likes the idea of GC expiring but in Canada it’s not secret so I recommend people choose not to get them or ask not to receive them. I think this is how a healthy market society works. I’d like to think I don’t need the government to baby sit me and make sure I don’t waste my money.
Well in the states, Social Security is the government’s way of babysitting my money, which they will use for me if I need it.
Amit
Peter, she is just overly gitty because Best Buy told her that she could keep 10% of the unused balance from any cards she sold over the next year ;-) In the looks department, she isn’t that bad but I prefer my meat a little younger… she seems to be in her mid-30s - although I could be wrong and its the compression artifacts aging her prematurely in my browser.
Jon
Personally, she scares the bejesus out of me. She looks like she is waiting for you to go grab one of those gift cards and then she’ll unleash her true form. She’ll hold you captive till the gift cards are about to expire and then release you and watch while you try to make it to your nearest Best Buy but you’ll never get there in time.
Amit
Thankfully, here in Kansas we passed a law that gift cards cannot charge fees after you buy them. They also cannot expire in less than five years. Other states should pass similar legeslation to stop the gift card racket.
Also worth watching out for various gift card scams. Apparently, there are all sorts of ways that crooks ’steal’ the value of gift cards, before you even buy them.
Here’s a site has some of the scams and some of the ways to avoid them:
http://www.scambusters.org/giftcard.html
I am pleased to say Target GiftCards NEVER expire or decrease in value. Gosh knows I have a bunch right now with all the over time they bribed ($5 TAX FREE g/c for every two hours OT) during the peak season.