We’ve talked a lot about unused gift card statistics and gift card fee structures, but have you ever wondered what actually happens to the money when a gift card isn’t used?
45.7 Billion Unredeemed
From 2005 to 2015, it was estimated that Americans amassed $45.7 billion in unredeemed gift card balances. And all that money left on the table doesn’t help businesses like you might think.
Most retailers, regardless of size, use a bookkeeping method called accrual accounting. In accrual accounting, companies choose to recognize revenue after services are rendered rather than when money is actually changed. This means that when it comes to gift cards, they count the sale when funds are used–not when the gift card is purchased. Because the revenue is deferred, unused gift card funds are considered liabilities.
And according to The Hustle.co, recent filings of several large corporations show that these unused gift card liabilities can seriously add up:
- Walmart: $1.9B (2019)
- Amazon: $2.8B (2018)
- Starbucks: $1.6B (2018)
- Target: $727m (2018)
So what does billions of unused gift card dollars mean for retailers?
The Impact
These liability funds are set aside for anywhere between 6 months to 2 years. After that time, companies can turn these funds into breakage income; essentially, this is their estimate of gift card balances that have not and will never be used. And that breakage income estimate becomes funds that the companies ultimately get for free–without any products or services rendered, and based solely on consumer statistical behavior. For many larger corporations, the breakage income revenue is well into the millions.
Break the Breakage Income Cycle
The great news is that because breakage income is based entirely on consumer behavior, consumers hold the power to break the cycle. Don’t let your gift cards sit and collect dust; get lost in your bag; stuffed into the back of your desk to be forgotten. Let us help you convert your card to cash! Download the app today and claim the breakage income for yourself in as little as 24 hours.
By prepaid2cash