Here's what happens to unspent gift cards

Making gift cards Great stocking fillers – As long as you don't put it in a drawer and forget about it after vacation.

Americans are expected to spend Nearly $30 billion on gift cards this holiday season, according to the National Retail Federation. Restaurant gift cards are the most popular, making up a third of those sales.

Most of these gift cards will be redeemed. Paytronix, which tracks restaurant gift card sales, says about 70% of gift cards are used within six months.

But many of the cards — worth tens of billions of dollars — end up forgotten or unused. That's when gift card life gets a little more complicated, as expiration dates or inactivity fees can vary by state.

Here's what to know about the gift cards you give or get:

Loved, but lost

After clothing, gift cards will be the most popular gift this holiday season. Nearly half of Americans plan to give them, according to the National Retail Federation.

But much of it will remain unspent.

Gift cards get lost or forgotten, or do the recipients Grab them for a special occasion. In a July survey by consumer finance company Bankrate, it found that 47% of U.S. adults had at least one unspent gift card or voucher worth an average of $187. That is a total of $23 billion.

The gift of time

Under a federal law that took effect in 2010, a gift card cannot expire for five years from the time it was purchased or from the last time someone added money to it. Some state laws require a longer period. In New York, for example, any gift card purchased after December 10, 2022 cannot expire for nine years.

Different state laws are one reason many stores have stopped using expiration dates altogether, says Ted Rossman, a senior industry analyst at Bankrate.

Either use it or lose it

Although it can take years for gift cards to expire, experts say it's still wise to spend them quickly. Some cards — especially general cash cards from Visa or MasterCard — will start accumulating inactivity fees if they aren't used for a year, eroding their value. Inflation also makes cards less valuable over time. If a retail store closes or goes bankrupt, the gift card may become worthless.

You might consider clearing out your stash on National Use Your Gift Card Day, a five-year-old holiday created by a public relations executive and now supported by many retailers. The next one is January 20, 2024.

Or sell it

If you have a gift card you don't want, one option is to sell it on a site like CardCash or Raise. Resale sites won't give you the face value of your cards, but will typically give 70 to 80 cents on the dollar, Rossman says.

Money trail

What happens to the money when the gift card is not used? It depends on the state in which the retailer is established.

When you purchase a gift card, the retailer can use those funds immediately. But it also becomes a burden; The retailer must plan for the possibility of redemption of the gift card.

Every year, major companies calculate the “fraction,” which is the amount of gift card liability they believe will not be redeemed based on historical averages. For some companies, like Seattle-based Starbucks, breakage is a huge profit driver. Starbucks reported $212 million in revenue from breakage in 2022.

But in at least 19 states — including Delaware, where many of the big companies are based — retailers must work with state unclaimed property programs to return money from unspent gift cards to consumers. Money that is not recovered by individual consumers is spent on public service initiatives. From the states' point of view, it should not go to companies because they did not provide a service to earn them.

Trust it

All 50 states and the District of Columbia have unclaimed property programs. Combined, these companies return about $3 billion to consumers annually, says Misha Werchkul, executive director of the Washington State Budget and Policy Center.

It can be difficult to find holders of unspent gift cards, but the growing number of digital cards bearing the recipient's name is helping, Wierschkul says. The state's unclaimed property offices jointly operate the website MissingMoney.com, where consumers can search by name for any unclaimed property owed to them, including cash from gift cards.