
The economics of unused gift cards - stephsmithio
https://thehustle.co/what-happens-to-unused-gift-cards
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JohnFen
I hate getting gift cards. If someone feels the need to give me a gift but
doesn't want to put thought into it, cash would be a much better choice.

When I do get a gift card, what I end up doing is giving it to someone else
who would appreciate it more. Or, if I can't find such a person (it tends to
be 50-50), then I sell it through a local classified ad site for 50% of the
value it contains.

~~~
nkrisc
I'd rather get gift cards because I can't stop people from giving me more
stuff. I don't want stuff, I don't need more things. At least gift cards don't
take up room or are easy to gift to someone else who might need it.

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OnlineGladiator
I think his point is cash is always better than a gift card. It's a weird
social norm that giving cash is lazy (which is arguably true), but what person
doesn't like cash? Unless you're gifting $100 to a billionaire, there's no
question of its utility and there's zero worry whether or not the recipient
actually finds the gift useful.

~~~
minblaster
I think gift cards have the implied context of “treat yourself”. Ie I might
give a gift card for your favorite restaurant. The cash might just be used at
the gas pump or buying groceries.

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JohnFen
> I might give a gift card for your favorite restaurant.

Wouldn't the much better gift be to take them out for a meal at their favorite
restaurant?

> The cash might just be used at the gas pump or buying groceries.

If someone gives me some money and I spend it on gas or groceries, then I
clearly need the gas or groceries the most at that time. I don't see the
problem with that.

But my main point, really, is that both cash and gift cards are (generally
speaking) terrible gifts because they don't have the one thing any great gift
needs: to indicate that the person cares about you enough to put some thought
into the gift. The actual gift isn't the thing itself, it's the time and
attention put into the thing.

But between the two poor choices, I consider cash to be the better option.

~~~
derefr
> Wouldn't the much better gift be to take them out for a meal at their
> favorite restaurant?

You're thinking of gifts for local friends/relatives. Think of your
grandmother who lives 5000 miles away and has never been on a plane. Can she
take you out to eat on a whim? No. But she _can_ connive to get you to take
_yourself_ out to eat, and think of her as you do so, making you perhaps a
little more likely to take a 5000-mile flight to visit _her_ one day. This is
the use-case that gift-cards serve.

~~~
JohnFen
> This is the use-case that gift-cards serve.

That's a reasonable use case (although I still think there are much better
options).

However, that's not the sort of use case that is usually involved when people
give gift cards.

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Sohcahtoa82
I like gift cards as long as it's for a store that I would normally shop at
anyways.

But a few years ago, I was given a gift card to Macy's. I don't shop at Macy's
and had a hard time finding something to get. Every single thing I looked at,
I could get at half the price basically anywhere else. I ended up buying some
kitchen stuff, but felt like the giver's money was wasted.

The _worst_ gift card in my experience is a Visa/MC/AmEx gift card. It is
often a pain to deal with them if the balance on the card isn't enough to
cover a purchase unless the business you're spending it at is capable to
splitting a purchase over multiple credit cards _and_ the cashier knows how to
do that.

~~~
dripton
I use the Visa gift cards for charitable contributions. The nice thing about
charities, as opposed to random purchases, is you get to pick the amount.

~~~
Sohcahtoa82
Oh that's a good idea.

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antisthenes
I only ever get Amazon gift cards. Don't know what I would do with something
like a Red Lobster gift card.

It's easy to redeem them immediately and have that balance in my account
forever.

~~~
ghaff
If a company gives me a gift card (some thing at a tradeshow, filling out
survey, etc.), Amazon's basically what I want. I enter it into my account and
it's basically right there effectively like cash.

I don't give gift cards but I guess they're OK if the person knows I shop
somewhere semi-regularly for fun type stuff. e.g. REI for me. Maybe it will
lead me to buy something that catches my eye but I don't _need_ so I'd
otherwise pass on.

Red Lobster I would be thinking "I didn't know you hated me so much." :-)

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gwbas1c
At least in my family, we only do gift cards for restaurants. It still has the
symbolism of a well-thought gift.

Otherwise, I just give my niece and nephews cash.

(Personally, I hate gift cards. They're usually at a place I'd never shop, so
I end up buying something of marginal value.)

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derefr
For a while, I would receive gift cards as gifts from my mother. She isn't the
type of person to buy gift cards for people. But, for a while, she worked at a
large supermarket chain, which meant that she could buy gift-cards from the
store she works in _below cost_ , i.e. that she could pay $90 to activate a
$100 gift card.

This would probably be the one-and-only time that gift cards are really
"better than cash."

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heinrichf
An economist one said "Socks and gift cards are the junk bonds of gifts"

[https://www.npr.org/2019/12/16/788587668/the-efficient-
chris...](https://www.npr.org/2019/12/16/788587668/the-efficient-christmas-
why-economists-hate-gifts?t=1578380529104)

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maerF0x0
[https://www.giftbit.com/business-solutions/send-gift-
cards-i...](https://www.giftbit.com/business-solutions/send-gift-cards-in-
bulk/) Is trying to help close the gap so that you can get something back if
it's unredeemed

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buzzert
Does anybody know of any non-scammy ways to turn visa gift cards into
cash/crypto? I’d love to do something irresponsible with mine, like gamble at
a bitcoin casino or something.

~~~
mustardo
Create two pay pall accounts, and send yourself an invoice from one to
another, settle the funds into your bank account, assuming this would work via
Stripe or other payment gateways. You'll obviously loose the CC processing fee

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ProAm
I literally just toss them in the trash because I know I'll never use them.

~~~
crazygringo
Wow. You don't even bother to just give them to someone? A family member, a
friend, a coworker?

I'm not shocked by a lot of things, but I guess I am kind of shocked that
someone would have so much money that it's not even worth their time to keep
it in their wallet until the next chance they have to give it to someone else
who would appreciate it.

~~~
ProAm
I used to but its more that I never remember them. A long time ago I would
save them and tell myself to remember to use them and I never did. Then I
would save them in my car for the next time I see a family member to give it
to them, and I would never remember then. Just a hassle, in all aspects so its
easier to toss them. Nothing gained nothing lost.

~~~
nessus42
Why not just hand it to the next person you see? Or put it next to the coffee
maker at work with a Post-It that says, "Take me"?

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SamBam
I'm interested in the economics and law of when this is counted as income.

The article says that in the general case, the company only counts the card as
income once it is redeemed. Until then it is counted as a liability.

This makes a little sense, since they still owe you goods and services, but
(1) aren't the goods/services they are offering worth less _to them_ than the
value on the card, and (2) aren't they generating interest off that?

Next, it says that under a 2009 law, the companies can start counting it as
income sooner (6-24 months), and the accompanying article suggests that this
is good for the companies' bottom line. But wouldn't it really be the
opposite? Before they counted it as income, surely they had all the benefits
of the money and it's not even being taxed as income yet? Wouldn't they want
to hold off on counting it as income as long as possible?

~~~
AmericanChopper
All outstanding gift (and loyalty) card balance is counted as liability
because they represent good/services (and in some cases money) that the
business currently owes to customers. I worked in the gift/loyalty industry,
and the article gets most things right, but the specifics depend a lot on the
jurisdiction and the nature of the program.

In markets that don’t regulate otherwise, a typical program will count unused
balance as breakage 12 months after issue. The typical balance on such a card
would amount to unspent change from a purchase. In regulated markets, they’ll
just follow whatever the regulation is, which sometimes requires charging an
“account maintenance” fee, instead of just removing the balance.

What happens to the money before it is either redeemed or taken as breakage
depends again on the specifics of the program and the jurisdiction. Sometimes
it will be required to be held in a trust, or in some other form of escrow.
Often this will preclude the possibility of earning interest.

Sometimes the gift card provider and the merchant are different parties. An
example of this would be a mall that sells a gift card that you can use to
redeem at any store in the mall, or a visa gift card. In this case, the
program operator does not simply exchange the balance for stock, they have to
settle cash with the merchant.

Loyalty liability is different again, because that’s liability that you never
received a direct payment for in the first place.

The one huge mistake that this article makes is that it claims the breakage
income is 100% profit. This ignores the costs of operating the program, which
is usually millions of dollars. Small retailers would receive trivial breakage
income, and would not necessarily even cover program costs with it. Medium
size retailers may or may not generate a profit on breakage, large retailers
likely do, but their program expenses are also enormous. The real value to the
business is customer acquisition.

