The gift card economy is so simple and yet so mysterious

“My advice would be to use up your gift cards as soon as you get them,” said Shelley Hunter of, a trader in gift cards of all varieties. “Do it now.” Retailers would wholeheartedly agree.
“My advice would be to use up your gift cards as soon as you get them,” said Shelley Hunter of, a trader in gift cards of all varieties. “Do it now.” Retailers would wholeheartedly agree. The Associated Press

The U.S. economy has functioned just fine on gift card currency since Christmas.

These last several days, wise consumers wasted no time redeeming that IOU from Best Buy or Home Depot, courtesy of cousin Carl.

Lest they forget and let all that value languish in a junk drawer. In fact, a survey by Consumer Reports found that one in four of us doesn’t spend gift cards within a year of getting them.

But most shoppers are learning in this everywhere-you-turn economy of the modern gift card, now observing its 20th anniversary.

“My advice would be to use up your gift cards as soon as you get them,” said Shelley Hunter of, a trader in gift cards of all varieties. “Do it now.”

Retailers, for one, would love that.

Contrary to common notions about unused gift cards, “retailers really do want you to use these cards up,” Hunter said. “It’s cleaner on their books.”

Cleaner on their books? So what else don’t we know about these cards?

Experts say consumers take gift cards for granted and don’t know how they function. Same as money, right, only encoded on plastic that costs about a dime to produce?

Perhaps you didn’t realize that each $25 loaded onto an Old Navy or Applebee’s card is recorded as a liability on those companies’ ledgers. Money is rung up, but it’s not pure income — the revenues that businesses like to tout to shareholders — until merchandise is sold or onion blossoms are served up.

As such, American businesses racked up more than $44 billion in liabilities in unused cards between 2008 and early 2014, according to a study by the online merchant CardHub.

But consumers are doing better at getting their money’s worth.

Seven or eight years ago, American shoppers who misplaced cards or allowed them to expire would annually leave several billion dollars of unused gift card value on the table. In 2014, according to industry analyst CEB TowerGroup, lost gift card value was kept to about $750 million.

That’s still an eye-popping sum to let slip away, but it’s less than 1 percent of all we spent last year on gift cards, that being more than $120 billion.

In Missouri, some of those funds get turned over to the state treasurer’s office as unclaimed property. Of the $822 million in unclaimed property now held by state treasurer Clint Zweifel, more than $8 million comes from gift cards and certificates unused for at least five years.

Perhaps you’re also unaware that many who smiled when receiving gift cards at Christmastime already have sold them at reduced value to online vendors.

See, they’re traded a bit like pork bellies.

Some kinds of gift cards are regulated differently than others. And rarely do any expire these days, thanks to state and federal laws designed to tame an industry that a decade back was getting out of hand.

“Obviously we changed the world a bit,” said Scott Meyerhoff, chief financial officer for Atlanta-based InComm Corp., an industry giant in the making and marketing of gift cards. (It’s making three-quarters of a billion cards per year, or 2.5 per U.S. citizen.)

He added: “We’re just in the third or fourth inning of what gift cards can be.”

$170 of cards

If you were like most Americans over the holiday season, you specifically asked for gift cards, received at least one and finished out the year spending about $170 buying them for yourself or others, says the National Retail Federation.

You may have noticed that shopping last week.

If not for gift cards being redeemed and still being sold, many retail outlets would have ended 2014 mainly dealing in after-Christmas clothing exchanges and whatnot.

Instead, those ubiquitous little slats of plastic kept shoppers swiping and cashiers crunching out sales last week at the Target store in Ward Parkway Center.

Some who bought two cough-and-cold products were entitled to free $5 Target cards to stack onto their collections. Some plunked down three bucks for a palm-size container with interior felt and lid — a “gift card holder” that might keep them from losing cards as they’ve done before.

And to think it all began at Blockbuster Video.

Remembered mostly for changing the way we viewed movies at home, Blockbuster also invented the modern gift card.

In late 1994, when there seemed no curbing the U.S. appetite for video rentals, Blockbuster began displaying on their retail racks prepaid gift certificates put to plastic.

The paper certificates previously issued were being copied and presented by customers who hadn’t paid for them, a little black market fueled by advancements in color copying, said Hunter of

What Blockbuster spawned, she said, was “a mess.”

As Neiman Marcus, Mobil and big banks jumped in with cards of their own, the marketplace became a multiheaded beast that wouldn’t redeem 10 percent of funds spent on gift cards.

Fees for inactivity were leveled at will. Sometimes cards were no good if they didn’t leave the house in a year.

There emerged “open loop cards,” issued by banks and credit card companies to be spent however a consumer chooses to spend them.

CardHub ranked the Visa gift card the most popular of these in 2014 — just above the Amazon and iTunes gift cards, which are (you might have guessed) “closed loop.” That means they can be spent only at certain stores or for specific brands.

And prepaid cards for wireless phone service behaved altogether differently, subject to their own set of rules that the federal Consumer Financial Protection Bureau presently is proposing to overhaul.

So cardholders faced different rules, fees, expiration periods and governing bodies for open loop cards than for closed loop cards. Some had activation fees, others didn’t.

Closed loop cards generally were free from penalties, so long as Blockbuster shops or Circuit City stayed open. Neither did.

States one by one crafted new laws, ostensibly to protect consumers, but Hunter and others saw confusion in the making. Which rules applied if a card was purchased in Missouri, given to a friend in Kansas and used on a trip to Nebraska?

“Your head begins to hurt,” she said.

Federal legislation that took hold in 2010 brought a measure of uniformity to a gift card economy veering all over. Retailers were banned from setting expiration dates earlier than five years after cards were issued or after funds were last added.

One thing to know is that terms and conditions are now, by law, spelled out on the packaging for each card.

Also, remember that retailers want you to use the cards. Market research shows that while many consumers leave a buck or two unspent on gift cards, those who exhaust balances typically spend an extra 20 percent at checkout. That’s $5 on top of a $25 gift card.

Industry analyst Daniel Wilkerson points out that businesses can’t expect all cardholders to use their plastic in a hurry. But even cards stuck a few months in a purse or at the bottom of a sock drawer carry a silver lining. For the retailer, they’re “a cheap alternative to traditional advertising.”

Customers are reminded whenever riffling through cards that owners are slow to redeem. He writes: “They’re almost like miniature billboards.”

Cons and pros

Donna Wallace was trying to do the smart thing at a Kansas City bath shop by using her $25 gift card days after receiving it from a co-worker.

Waiting in line to make her purchase, she phoned the number on the back of the card to have it activated and make sure it covered her purchase.

A few minutes later, the clerk swiped Wallace’s card and said it was invalid.

Experts say some cards can take time to activate. But Wallace couldn’t get a swift explanation because she tried the phone number four more times and couldn’t get connected.

“This time of year, everyone in the country is probably trying to get through,” she said.

Even though the National Retail Federation reports that 62 percent of U.S. consumers were hoping to get gift cards during the holiday season, they have developed critics these last 20 years.

Too impersonal, too easy to buy and too easy to misplace. Too plastic — although new technologies are rolling out biogradable and eco-friendly cards.

Maybe the biggest knock on gift cards is that recipients can ignore them and never tell cousin Carl he threw good money away.

That may become less common given the growing use of electronic gift cards, which are no cards at all. They’re bar codes shared through email and mobile devices, which can alert the giver when gift values are used.

For now the sneakiest recipients may secretly trade in cards for cash at websites such as GiftCardRescue, CardPool and Plastic Jungle, which operate similarly to commodity exchanges. recently offered $89.50 for anyone’s $100 Best Buy card with the intent of reselling it for three or four dollars more.

For its part, Wal-Mart on Christmas Day launched its own trade-in site allowing customers to exchange unwanted gift cards for Wal-Mart cards.

Officials with the Missouri and Kansas treasurer offices urge consumers to check other websites to see if any of those millions of dollars in unclaimed gift card funds belong to them.

It’s a long shot in Kansas. Businesses there are not required to turn over unused gift accounts to the state. A spokesperson said it’s worth a try by typing your name in the unclaimed property page on Treasury Secretary Ron Estes’ website or at, a national registry of unclaimed property.

The Missouri site is

For Ward Parkway shopper Chrissy James, OK, the gift card economy has taken some of the personal touch out of how holidays are spent. But she said she’d prefer the practicality of plastic any day to ugly gift sweaters that she’d never wear.

“At our family gathering this year, prepaid gasoline cards were huge. Everyone needs gas,” said James, who got three or four cards as Christmas gifts.

Her cousin Ethan James delighted at receiving a gift card to McDonald’s, one of his first ever.

What would a sweater mean to him? He’s only 2.

To reach Rick Montgomery, call 816-234-4410 or send email to