How States And Companies Make Money Off Of Unspent Gift Cards

In the last three years, New York has collected $19 million in unused gift card balances under the state’s unclaimed-property laws. Best Buy added $135 million in unspent gift cash to its total operating income over the past two years. “For individual retailers, unspent balances can range anywhere from 2% to more than 10% of all gift-card sales,” notes BusinessWeek.

The laws differ from state to state, and companies tend not to report on gift card income, so it’s hard to get an accurate idea of what happens to all those forgotten or abandoned cards. New York state is trying to push other states to support a “uniform federal solution” that would let all states grab a slice of the gift card pie—which certainly can’t impress businesses, who must report gift card amounts as liabilities until they’re spent or expired.

Who gets to keep that money depends on where the retailer locates its card division. Some states, including Delaware and New York, demand unspent balances be sent to them after periods ranging from two to five years. (If the card is used after that point, the retailer generally honors it but can apply to the state for a reimbursement.) Other states, including Florida and Virginia, allow retailers to hang on to the money. In those cases, after periods ranging from 18 months to seven years, the retailer can move the money from the balance sheet directly into operating income.

“The Scramble for Gift-Card Cash” [BusinessWeek]


Edit Your Comment

  1. Ben Popken says:

    It’s called escheatment.

  2. VeritasVierge says:

    You can’t hold this against retailers in any way and I don’t see the need for a “uniform federal solution”. It’s not their fault people are negligent with free cash in card form. I wish I got more gift cards as as gifts more often. So long it’s not from Target or Wal-Mart. The feds are just looking for a way to tax retailers for that wad of cash.

  3. Tux the Penguin says:

    In my classes back in college, many of my professors called it “cheatment.” Basically, the state says to the company, “you can’t be trusted with trying to find the legitimate owners of this uncollected/unspent amounts, so you’re going to write us a big check and we’ll find them, *wink wink*.” Really, all it does is allow the state to collect interest on the balance and publish a list once a year in major newspapers and maintain some dinky website. Its really almost a sham considering how much of that unclaimed property never gets claimed. The states should be forced to keep records and give it back to the company after a few years earning interest for the state.

  4. Xerloq says:

    I don’t understand why people won’t just give cash. I mean, who seriously thinks of another person and says “I really have no idea what you want for National Festivuramahaunakwansmas Annual Day (Observed), but you have to limit your choice to BEST BUY!”

    Send me a Benjamin. Thanks. The new ones with pretty colors are just like wrapping paper!

    Save A Friendship: Give Cash.

  5. econobiker says:

    How do people not spend gift card money?

  6. Xerloq says:

    @veritasvierge: Um, most gift card aren’t free. I think that’s one of the recurring themes on The Consumerist. See my previous comment.

  7. zibby says:

    Granted, these state money grabs are annoying but so are people that lose/forget gift cards or just never get around to using them. If people apparently find using a gift card so challenging, well, that whole rebate thing becomes a lot easier to understand.

  8. sleepydumbdude says:

    I hate how some people say that there isn’t a thought put into cash but they turn around and give a gift card. So they put a bit of thought where they want me to spend it, I’d rather have cash.
    I sell mine, minus the walmart ones I use towards groceries.

  9. zibby says:

    @xerloq: You know what? I agree, cash is nice. But often people that will piss it away on crap instead of getting what it is they want. Example: My mother wants a new outfit. Now, I’m not going to pick out my mother’s clothing but I know her well enough that if I sent her that $100 that she’ll spend it on gas and magazines and other non-gifty items and make a mental note to buy that outfit at some later date – which four out of five times she won’t do. If I get her a card from Talbot’s or wherever, she’ll get the damned outfit.

    Cash is just too fungible for some people to handle. Horse/mouth, etc.

  10. Geekybiker says:

    @zibby: Agreed. And that’s why I like gift cards. They are forced to spend it on something fun instead of paying bills, etc. I’m guilty of that too. Cash or check just gets dropped into the bank and never specifically spent on something cool. I just wish I could convince people to get me certificates. They have just about everything you could want unlike most places you’d buy them.

  11. squikysquiken says:

    @Tux the Penguin: What makes you think the company will bother finding the owner of that money ? Or even be around when you find that uncashed check or gift card 5 years from now. And it is called: “escheat”.

    This post could make it a little more clear that the state doesn’t just enrich itself, tax more or “cheat” people. For example, I recovered an old insurance payment (check never cashed in) years later after the company was gone. Escheat is a long standing legal doctrine and it is useful.

  12. trujunglist says:

    I’d rather be able to pay bills, buy gas, and eat than bother going to Best Buy to spend my $25 card on… nothing, because you can’t get anything good for $25.

  13. gingerCE says:

    I admit, I have numerous gift cards I haven’t used yet. I used one recently that I’d had for 3 years–misplaced it and found it out of the blue.

    Someone I know had just gotten a ton of gift cards for her bday then had her purse stolen so she lost all of them. I really hope the thief never used them. I’d rather the money go to the state or the business than to the thief that stole her purse.

  14. ClayS says:

    I didn’t see it in the article, but I have read that there are tens of billions in gift cards out there. That is a huge amount of money in what amounts to interest-free loans to these retailers. Even if all the card are eventually redeemed, they are making out like bandits.

  15. gingerCE says:

    Actually I have 4 giftcards in my wallet right now. Gap, B&N, and 2 local restaurants. At home I have old gift cards (I think one might be close to 5 years old) to Home Depot, Mervyn’s, and Radio Shack.

    I do use gift cards, recently an Amazn gift certificate, a Starbucks card, and another B&N card. In California, gift cards don’t expire.

    Curious what giftcards are in other peoples wallets.

  16. morganlh85 says:

    @econobiker: That’s what I don’t get either. When I get gift cards I spend them within a week or two of getting them!

  17. sleepydumbdude says:

    @gingerCE: I have some restaurant gift cards that I bought for places I eat. Around christmas many had the deal that you got a 5 dollar coupon for purchasing 25 dollars in gift cards. I ended up getting another 25 dollar one everytime I came in and now I have about 11 in my wallet. Got a few Ruby Tuesday, Hacienda, and Applebees.

  18. givememymoneyback says:

    Retailers obviously love gift cards because there is a good chance you’ll spend more than what’s on the card. I hate it when they won’t give you any money back and just another “gift card” with $15 on it. I think I have cards that have a bunch of cards that have very small amounts left. Why can’t they just give the money to the gift holder. Send us a check after a year or two if there’s something left on the card….I got a Visa gift card this Christmas and it charged me $4.50 for every transaction I made.

  19. Empire says:

    @xerloq: Marketing, of course. Marketing has taught us that gift cards are thoughtful and cash is tacky. It has also taught us that no one will ever love you unless you buy her a diamond, as well as many wonderful and useful things that weren’t true until an ad campaign made them true.

    @morganlh85: I have a year-old $50 gift card for Best Buy. You know what you can buy for $50 at Best Buy? Neither do I. I have another gift card for FYE, which sells music, but only the clean versions of albums nobody ever wanted to own. And so on.

  20. 1N0X1 says:

    I like gift cards but they are frustrating. Especially when you have that $1.09 remaining. I don’t want to throw that card away because of the total. When the balance gets to that point I wish I could go to the store and exchange the gift card for the remaining balance. When stores don’t do that I feel like I am forced to buy something to zero-out the card and pay the over amount with cash. I find myself doing that even when I don’t want to buy something, just to get rid of the card from my wallet.

  21. laserjobs says:


  22. mac-phisto says:

    @xerloq: i’m with you. you can’t roll up a gift card & use it to snort coke off a hooker’s ass & then use it to pay for the festivities, can you?

  23. weg1978 says:

    @Ben Popken: This stuff might be escheated, but the better description would be seigniorage.

  24. humphrmi says:

    I have a few questions about this… so first, what happens with diminishing value cards, where the company charges fees against the gift card until it’s valueless… do the states get a diminishing-value unclaimed amount? I mean in a case where, say, the state requires the unclaimed cash value at 2 years, and say it takes three years for the card to diminish to zero, does the state get “one year” of that value in their coffers?

    Also, let’s say you’re smart and you do chase down any of your potential unclaimed property in your state. How do you identify your gift card, and prove the balance? How does the state confirm that it’s you? I mean, sure… you have the gift card, but it’s not like the state offices that run these things have swipers. And the cards themselves usually don’t print their value on the card, so it just says “Target” on the card and then has a mag-stripe on the back. I don’t get it.

  25. JollyJumjuck says:

    @humphrmi: Here’s yet another example of how the buyer gets screwed in a transaction. The buyer (gift-giver) buys a diminishing balance gift card, but the gift card isn’t used in the allotted time by the gift recipient. So not only does the seller (the corporation) get free revenue (they get the money but do not have to exchange anything for it, other than a plastic card), but since they tend not to report it, it isn’t considered taxable. It’s free money.
    Do you know what it’s called when the buyer gets something for nothing? It’s called “stealing.” But when the seller (corporation) does essentially the same thing, it’s called “escheatment” and is legal!
    Does anyone else have an ethical problem with this? The buyer (person) is required to act ethically with the seller (corporation), but the reverse doesn’t hold.

    [Stands back and waits for the hypocritical “buyer beware” card to be played]

  26. XTC46 says:

    I work at CompUSA and becasue we are closing I am getting tons of calls about giftcards people have. Some are worth upwards of a thousand dollars (they returned a computer but we gave store credit not cash back)and others are for 10-100 etc that they got as gifts over the years. I keep giftcards so when im broke and feel like buying something I still can (I currently have gift cards for Bestbuy, Borders, E&O Trading Co, Dave and Busters, and a few other random ones in my wallet) Ill use them eventually, but I don’t go to the store just to spend them, ill use them when I actually WANT something.

  27. coren says:

    @xerloq: They are when they’re given to me. I think that was their point, free to the recipient.

  28. phalex says:

    Today I received a $20, two $10s, and three $5 bills in a very nice goodbye card from the co-workers and supervisors I’m leaving after I move this weekend. They had clearly taken up a collection.

    I was so damn glad they didn’t get me a giftcard — I could spend this on a bus pass in my new town, a laptop case, or stress-relieving booze. I know from this more than any job reference or verbal praise that they valued my contributions to our workplace.

  29. Trai_Dep says:

    That’s why I grandpa booze and hookers. Brings a smile to his face every time, and he never tucks it in his pants to be forgotten.

  30. Hoss says:

    @Tux the Penguin: Before escheatment laws businesses would just take unclaimed funds into income after a short period of time. States now hold unclaimed funds for their rightful owner. These laws are consumer-friendly; I can’t see how any consumer would have a problem with the law.

  31. aikoto says:

    @veritasvierge: BS it’s not their fault. They design the system to encourage forgetfulness or mistakes. Tell me how that’s not their fault?

  32. RandomHookup says:

    What I can’t understand is how does the state attach the value of the cards to an individual? I can understand how they do it with bank accounts or dividends…at least there is a name and address. Most gift cards are probably purchased with credit cards, but does the gift card account get linked to the purchasing card number? And aren’t most gift cards given to others?

    I do believe the states should go after the rebate houses for uncashed rebate checks. It that situation you have a name and address to work against and it eliminates an incentive for the rebate house to be sloppy.

  33. floydianslip6 says:

    @aikoto: Because spending a gift card isn’t that hard of a thing to do?

  34. Bunnymuffin says:

    @Tux the Penguin: Those publications in the newspapers do work. I used to handle all the legal publications for a newspaper I worked for and I’d get calls from little old ladies wanting to know why I put their names in the paper. The best find was the year I scanned the list while formatting it and came across my coworker’s maiden name. It turned out the state had been able to collect a couple of hundred in child support from her ex(all he had paid in 14 years)and was trying to get it to her.

  35. gingerCE says:

    @sleepydumbdude: That’s actually a good idea. I was at Chevys and they were running a promo of buy $40? $50? gift card get a free meal around holiday time. I recall Jamba Juice and Starbucks were giving out free drinks with gift card purchase around the holidays too.

    @humphrmi: I don’t know about all stores, but you can check a gift card balance for a Target card online on their site–I’ve done it before.

  36. nardo218 says:

    So . . . what do you do if you lose your gift card? I don’t have any of the numbers, though my mom probably has the credit card she used to buy it.

  37. Xerloq says:

    @coren: Not necessarily free to the recipient. Some gift cards have transaction fees where the recipient pays one or two dollars each time they use it, or a low balance fee, monthly fees, maintenance fees… Suddenly 30% of your $100 is gone in fees. Cash never did that… unless it was the current US Dollar. I still prefer cash.