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]