Expired gift card money has been a concern this holiday season. The gift season is in full glory starting from Thanksgiving up till the New Year. The chances are that you are either the recipient of a gift or you are planning to give a gift to someone close to your heart. Gift cards are the most common form of gifts being exchanged during the holiday season.
Gift cards have gained circulation because of the freedom of choice it offers to the recipient. It has been statistically proven that most of us wait for too long to redeem the gift card and after some time, you are in the possession of an expired gift card. It is not surprising that billions of dollars of expired gift cards end up in the state’s unclaimed-property account.
Abandoned or unredeemed gift cards are a major source of revenue for most of the state treasuries. Gift cards which are not redeemed within a certain period of time are automatically transferred to the state escheatment fund. A majority of the states have practical laws regarding unclaimed property that deals with dormant bank accounts, unclaimed safety-deposit boxes and uncashed , expired gift cards, lost savings bond, or abandoned pension funds. These laws are called escheat laws. In recent years, the popularity of gift cards has made state treasurers re-examine state escheat laws regarding gift cards because of the huge revenue involved.
The question that has been raised after the discovery of millions of unclaimed gift card is whether the use of expiration date is at all necessary. Many of the gift card retailers have removed the expiration date from their gift card; J.C. Penney Co. Inc., Wal-Mart, Home-Depot, Target, and Costco have all but done away with their expiration dates and fees and will redeem your gift card for merchandise anytime, even after a number of years. But, there are still a lot of gift card retailers who are persisting with expiration dates and late fees. States are “looking under every rock,” said Mary Bernard, a tax expert at Kahn, Litwin, Renza & Co., an accounting and business-consulting firm based in New England.
In a survey, the following information came to light: Each year Americans spend about $65 billion in gift cards—excluding bank-issued prepaid cards—but don’t redeem $6.8 billion, according to a research by TowerGroup, a financial-consulting firm.
What happens to the unused amounts varies by state and company, but they often revert to retailers as income. States that collect abandoned gift cards require retailers and third-party gift-card processors to update a database keeping track of when a card is issued and when it is used.
“We’ve never understood why the state considers this money abandoned property,” said Jim McGregor, director of government affairs at the Maine Merchants Association, a retail businesses advocate. Many of the top retailers have also expressed displeasure about states’ attempts to go after gift cards that have no expiration date.
“One of the benefits of offering gift cards which never expire is that it affords the guest the opportunity to use them at any time,” said Target Corp. spokesman Eric Hausman. “The proposals under consideration would essentially impose an expiration date on our gift cards.”