Gift cards have hidden surprises like unspent balances, fees, and scams that can reduce their value.

This holiday season, nearly $30 billion in gift cards are expected to be purchased by Americans. While this convenient present is popular, there are certain challenges that come along with its use. CBS News reported that restaurant gift cards compose one-third of the total sales and understanding its usage becomes more important.

Paytronix found that 70% of gift cards are redeemed within six months, but a significant portion, valued at tens of billions of dollars, remains unspent. Bankrate further revealed that 47% of U.S. adults possess at least one unspent gift card or voucher, which is estimated to be about $23 billion. According to federal law, gift cards cannot expire for five years, but some state laws extend this period further. For instance, New York requires a nine-year expiration period for cards purchased after Dec. 10, 2022.

It is suggested that consumers use their cards promptly. For certain cards, such as generic ones from Visa or MasterCard, inactivity fees may be accrued after a year of non-use, which can decrease the card's value. Inflation also contributes to the decreasing value of cards over time. Moreover, if a retail store closes or goes bankrupt, the gift card could become useless.

Those who want to get rid of unwanted cards can do so through resale sites like CardCash or Raise. It is, however, important to note that the cards will usually not be sold at face value, but rather, at 70 to 80 cents per dollar.

The fate of unspent gift card money depends on the state where the retailer is incorporated. In at least 19 states, retailers must work with state unclaimed property programs to return money from unused cards to consumers. Some companies may calculate “breakage,” the anticipated amount as a liability that won’t be redeemed, which can become a profit-driver, as seen with Starbucks, which generated millions in revenue.

It is essential to stay vigilant against scams as well. In 2022, nearly 65,000 consumers fell victim to scams, losing more than $228 million, according to the Federal Trade Commission. Scammers often pose as legitimate businesses, charities, or government agencies, asking victims to purchase gift cards and reveal card details. To combat this, consumers should report incidents to the gift card issuer and attempt to recover funds as some companies are flagging fraudulent transactions and freezing gift card funds.

For those looking to clear out their unused cards, Jan. 20, 2024 marks National Use Your Gift Card Day. It is an opportune moment to use up those cards and avoid any potential scams.

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