New Laws Mean Unused Gift Card Money Won't Be a Gift to Stores

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Gift cardsGift cards have made holiday shopping a whole lot easier for millions of people. But they also raise a big question: Who should profit when people don't use up their gift card balances?

Until recently, if you didn't use your gift cards, the companies that issued them won. For years, companies like Best Buy (BBY) and Home Depot (HD) have reaped big gains from gift cards they expect won't get used.

But a new trend has changed the playing field. Several state governments have passed laws subjecting gift cards to the same rules that cover unclaimed bank accounts and other property -- and the huge amounts of cash they've grabbed up in the process have helped them manage financial woes and budget shortfalls.

Gift-card providers argue that the laws impose an unfair burden on them, as they have to collect information that they haven't had cause to gather in the past. In response to a New Jersey law, American Express (AXP) has said that it plans to stop selling cards in the state rather than have to comply with the law.

The Better Solution

Theoretically, having the state collect unused gift-card balances is arguably better for consumers than having card issuers keep the money. With procedures in place for you to collect unclaimed property from the state, you could get your lost gift-card money back.


The better solution, though, is never to let your gift card go to waste in the first place. That's easy if you like the store: Just use up the money on the card quickly.

But what if you know you'll never spend the money? A number of websites have sprouted up to handle that problem by letting you sell gift cards for cash. Plastic Jungle, Cardpool, and GiftCardRescue are just a few of the companies that will buy gift cards from you. You won't get the full cash value of the card -- but with payouts typically ranging from 70% to 95% or more, you get a nice payoff in exchange for something you never would have used.

In the end, controversy about unused gift cards doesn't have to affect you at all. Let state governments and card issuers duke it out over unused gift cards, and just make sure you get your money's worth from the cards you receive.

Motley Fool contributor Dan Caplinger never met a gift card he didn't like. You can follow him on Twitter here. He doesn't own shares of the companies mentioned. The Motley Fool owns shares of Best Buy. Motley Fool newsletter services have recommended buying shares of Home Depot and writing a covered strangle position in American Express.




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10 Comments

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mindyfoos

solution: give cash - it's more convenient. and i think people like it better anyway.

April 23 2012 at 8:52 PM Report abuse +1 rate up rate down Reply
ganick

This will help ease unemployment. The states can hire dozens and dozens of people to administer the program. Then hire that many more to police the stores financial records to make sure they comply. Pay them new hires a good wage with great benefits (for life) and an enormous retirement pension. Make it so they can not be fired for any reason and give them every opportunity to do as little as possible. Then just raise our taxes. Business as usual.

April 23 2012 at 4:02 PM Report abuse +1 rate up rate down Reply
tnjr

Oh yeah, having the state collect the unpaid balances is a great idea. Then the state can post your name in the newspaper that you have an unpaid balance. How many people actually read a newspaper these days, let allow those legal notices posted by banks? Then the state will keep the money if you don't claim the money in the time period designated in the legal notice. If you try to get it back, they will say it was posted as unclaimed and never collected in the time period involved. And who determines when a gift card is "unused". Last week I used a gift card that I received for my birthday over a year ago. Steakhouse took it, no problem. Imagine my anger if they came back and declined the card saying that it was no longer good and the state collected on the funds, file paperwork with the state. Then state says, oh we posted it and the date passed, too bad. In NY, gift cards, I believe, have no expiration date. This is just the state trying to get your money, another anti-consumer state consumer law.

April 23 2012 at 2:33 PM Report abuse rate up rate down Reply
Pllc15

I clearly remember when the actor, Karl Malden, promoted American Express Traveler's Checks on TV in the 70's telling us to always keep one check handy in your wallet in case of an emergency . I see from the above article that American Express is not going to sell their gift cards in NJ that passed laws favoring the state in claiming unused cards. What is the deadline for these cards? And I suppose it becomes state property in same way inactive bank accounts are treated. I know that telephone cards is another business that should be classified in the same way as gift cards because they are only good for a couple of months after you use it for the first time. So the issuer benefits from the unused portion. I thought that policy was a little bit unfair after they cut you off in placing a telephone call saying your card is no longer valid after their self-imposed expiration date. It's written in very small print on the back their card.

April 23 2012 at 12:27 PM Report abuse rate up rate down Reply
rini1946

the only thing I want on a gift card is no exp.date. And for the goverment ot keep thier hands off them. To me they are great I have some for best buy lowes, home depot. And any time I need something I use my gift cars. I buy them from giant eagle when they have the 20 cents off the gas and my credit card that adds another 4 cents off. each 50 bucks. And if the goverment gets thier hands on it !!!!!!!! there goes my savings.

April 23 2012 at 11:00 AM Report abuse rate up rate down Reply
romalue

The large retail company I work for loves it when someone purchases a gift card, the reason, because most people do not use it. The district manager stated that it is like free money for the company. Nice huh? Don't think they would like these new rules if they are made into law.

April 23 2012 at 10:44 AM Report abuse rate up rate down Reply
1 reply to romalue's comment
tnjr

Duh, if the state is passing these laws to help state revenues that means that they are planning to keep the money and not really thinking they are going to pass it to you. It's more trouble to collect unused gift card money from the state compared to the company. This is a loss for consumers as the state will determine when a card with no expiration date is unused and now their money. Use your brain, if how could the state use this money as additional revenue if they are planning on giving it back to you? At worse, you, the taxpayer, will have additional state govt expenses as they need to staff up their consumer "protection" deptarment to give you back your money (that they intend on keeping).

April 23 2012 at 2:39 PM Report abuse rate up rate down Reply
Frank

We have already stopped buying gift cards that require activation fee's....American Express is one of the biggest culprits. Yes, gift cards are convenient but we are not going to spend $4.99 and up in activation fee's. Also, kind of a rip-off how it costs another $2-4 to activate a higher denomination card. Too each his/her own, as for us we will not purchase them. The government should NOT involve itself in the process. Customers need to take responsibility and understand what they are buying.

April 23 2012 at 10:43 AM Report abuse rate up rate down Reply
wbischo

No company should CONTINUE TO OFFER gift cards if they are going to incur more work and less profit, than they could get under the old rules. Gift cards are a service to the buyer, and ALL profits should go to the seller who provides this service.

April 22 2012 at 1:25 AM Report abuse +1 rate up rate down Reply
you old fart

lets have goverment keep it's snout out of this it will only add to a overburdened tax burden if goverment ran crime it would'nt have any profit don't buy the stupid cards to begin with

April 21 2012 at 10:31 AM Report abuse +2 rate up rate down Reply
1 reply to you old fart's comment
wbischo

These are state governments who are implementing this change, so they can raise their state revenue income. Businesses should stop selling the cards "to begin with''. They were providing a service to
their customers, now they will lose part of the profit they were getting and state governments will incur more paper handling expense too..

April 22 2012 at 1:29 AM Report abuse rate up rate down Reply