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Card sharks

November 24, 2006

In a previous post, I talked about a USA Today article that mentions retail theft through use of counterfeit gift cards.

It made me think of a Blockbuster gift card a friend gave me in college in 1999, which was found over the past summer in a box of college junk.  It was 5 years old, and likely expired and worthless.  And besides, I think I may still owe late fees there…

Last month, I found a gift card from Barnes & Noble that a co-worker given me a few years ago that had got buried in my computer bag.  That had expired as well.

I wondered … Who got that gifted money anyway?  The company?  The bank?

This year, over $24.8 billion will be given out as store gift certificate debit cards — that’s more than $5 billion more than last year, according to the National Retail Federation.  So you can imagine how serious the industry takes these threats to their popular product.

But it’s not just the thieves going after your gift card dollars that Grandma gave you.  The companies themselves want those funds back from the 5 to 10 percent of gift cards that go unspent, according to the Kansas City Star.

Now, states’ attorneys general are now trying to impose rules that make sure retailers can’t keep any funds from expired gift cards.  And that’s good for the consumer.

Most gift cards have a one- or two-year deadline to use all of the card’s funds, before the issuer starts charging you monthly fees, which will eventually deplete the card’s credit, or reclaim all the money for themselves.  But now, states are looking to impose time limits on such cards, so that after the card expires, the money will be turned over to the state as “unclaimed property” — meaning no windfall for the issuer.

A New York state court ruled this way last year, saying any card that expired must have its funds sent to the state, and any card with no expiration date must be voided and have its funds sent to the state in five years.

From CBS News’ Ray Martin:

About 18 states have passed laws banning or limiting expiration dates on gift cards, but even so, nationwide, the value of unredeemed gift cards totaled over $2 billion last year alone. Gift cards sold in some states cannot expire sooner than seven years, some states require full consumer disclosure by any retailer selling a gift card that expires and in other states, unredeemed gift cards are considered abandoned assets after three years and are turned over to the states unclaimed property departments.

That CBS article also has other great tips for gift-card givers, with things to look for in the gift card’s agreement that could be bad for the giftee, such as excessive fees and so on.

Gift cards are also changing the way stores market to their customers, holding back some new items for the post-Christmas rush, MSNBC reports:

The advent of the gift card is also beginning to alter retailers’ behavior in a different way, observes Cody, since revenue is not recognized until the cards are used, typically after Christmas and into the New Year.

Post-Christmas is becoming less about clearance, he suggests, and more about promoting newer, more fully priced items to gift card redeemers.

This could mean even more emphasis on selling clearance merchandise before Christmas to make room for fresh merchandise after the holidays. Also merchants want to continue selling while consumers are in the store buying those gift cards.

Consumers are also turning to the Web for gift card buying and selling.  Sites like Gift Card Buyback allow gift-card recipients the chance to trade or sell cards with other people.  The catch: It’s very hard to avoid fraud in such a manner, because many gift cards’ printed value is not necessarily what the card is currently worth, due to purchases, fees, and so on.

All this talk of gift cards reminds me: I wonder what came out of all those $1,000 charity debit cards Oprah gave out?

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