Is Your Gift Card Expired? Make the Most of Your Gift Cards by Knowing the Law

Over the holidays, I gave my parents a gift card to a local Mexican restaurant. I didn’t expect them to use it right away. But I was floored when they told me that the gift card is somewhere in their home. Good grief.

Hopefully, they’ll find the gift card soon. Why? Because just like any perishable items in your fridge, gift cards also expire.

Why We Love Gift Cards

Gift cards are always a welcome gift, whether you are giving one or receiving one. Sure. They aren’t the most creative or thought-provoking gift. However, they’re convenient and flexible. Perhaps that’s why 54% of Americans surveyed said gift cards are the most wanted gift during the holidays.

In the era of COVID-19, rising costs, inventory shortages, and shipping delays, however, gift cards have grown in popularity. According to InMarket, the following key findings were found:

• In 2022, 67% of respondents planned to buy a gift card as their top holiday gift. Among other categories, gift cards outpace clothing (56%), toys (41%), and electronics (27%).
• The most popular retail category for gift cards is Big Box (32%), followed by Apparel (27%) and Beauty (23%).
• In 2022, spending on gift cards was expected to continue to exceed pre-pandemic levels, even though it declined from its 2020 peak.

About 65% of gift cards are redeemed within 180 days of purchase. Marketers have the opportunity to engage shoppers at a critical stage of the purchase cycle as a result.

In spite of that, it is not all honky-dory.

It was found that 47% of U.S. adults have at least one unused gift card, voucher, or store credit, according to a CreditCards.com study conducted by YouGov.com. The survey also found that the average amount of unspent gift cards, vouchers, and store credits was $175, up from $116 last year. Overall, U.S. adult populations have unspent cash totaling $21 billion.

Now is the time to use these gift cards, says Ted Rossman, senior industry analyst at CreditCards.com. “With inflation at a 40-year high, everyone is looking for ways to save money,” he says. “Putting your unused gift cards to work is an easy way to unlock some hidden value.”

What Is the Shelf Life of Gift Cards?

Thanks to the 2009 CARD Act, gift cards last at least five years from the date of issue.

According to the law, retailers cannot deactivate a gift card less than five years old, and fees for inactivity are limited. Basically, that means that if a business tries to claim that a gift card is expired due to its age, you have recourse to contest that claim

All 50 states must comply with this rule. Also, the recipient needs to know the terms and conditions of the gift card. The expiration date is included in these rules. However, some states require that the receiver follow certain specific circumstances.

In some states, gift certificates and gift cards are regulated by law. There are no expiration dates or dormancy fees on gift certificates and gift cards in California (except in certain cases), for example. And you can use the balance for cash if it is under $10.

Fees vary from state to state as well. In some states, for example, any fees must be disclosed on the card packaging. If states allow post-sale fees, they should only be charged once a month after one year of inactivity.

The issuance of post-sale fees for gift cards is governed by state legislation in a few states, however. A fee is charged for maintenance, activation, and transactions during the purchase process. There must also be a statement describing the accompanying fees on the gift card.

If your state has laws covering gift cards and certificates, consult the State Statutes for Gift Cards and Certificates published by the National Conference of State Legislatures. Alternatively, you can speak with a local lawyer about the state’s consumer protection laws.

What’s Wrong with Gift Cards That Expire?

For me, expiring gift cards are a losing proposition.

For one, it’s got to be a bummer for the person who purchased the gift card. What if my parents never find that $100 gift card that I gave them? That means it is left unused. To be honest, I could have just taken a Benjamin and lit it on fire. And because I know they lost the gift card, I’m even more ticked off.

Suppose my parents find the gift card. Then, to their dismay, they discover that it has expired. It’s very likely that this won’t reflect well on the business. As a result, the customer experience won’t improve. It doesn’t motivate them to return to this restaurant — especially since they occasionally patronize it.

Furthermore, even though it’s illegal for cards to expire until five years down the road (at least), their value can start to depreciate before then. As a refresher, the reason is that depending on the state, some businesses can charge fees for inactivity after a certain time period, depending on certain circumstances.

As for Businesses, Unused Gift Cards Can Lead to Brokerage

Furthermore, even though it’s illegal for cards to expire until five years down the road (at least), their value can start to depreciate before then. As a refresher, the reason is that depending on the state, some businesses can charge fees for inactivity after a certain time period, depending on certain circumstances.

As for businesses, unused gift cards can lead to brokerage.

“Breakage is an accounting term that identifies revenue recognized from services that are paid for but not used,” explained Aaron Hurd and Dia Adams in Forbes.

“The most familiar example of breakage is in gift cards. Many retailers sell gift cards because they know that a certain percentage of the gift cards they sell will never be redeemed,” they add. “Some gift cards will get lost, some will get thrown away and some will just get forgotten. In every case, unredeemed gift cards represent additional profit for the issuer.”

The loss of value caused by gift cards, miles, points, certificates, and other stores of value expires, is lost, or otherwise goes permanently unused from a travel and personal finance perspective.

These liabilities can also be converted into breakage income after some time — typically between six and 24 months. It’s how much money the company says won’t be redeemed from gift cards. In other words, the company is getting free money.

However, it might make sense for a business not to let gift cards expire. It’s been found that 75% of people who redeem gift cards spend more than they intended.

Gift Cards: How to Make the Most of Them

You can avoid confusion over expiration dates and fees by using your gift card right away.

Tips for When You Receive a Gift Card

• Be sure to put it in a place where you will remember it. Instead of tossing gift cards in your dresser drawer, place them on top of your dresser, where they will be more visible. Alternatively, you can set a reminder on your digital device to remind you of its location.
• This month, plan on using it. To make the most of an experience gift card, such as one for a restaurant, spa, or museum, book your appointment or reservation right away.
• It shouldn’t be left unused for more than a year. There should be a five-year time period (at least) before any repercussions are felt. However, if the store closes its nearest location or goes out of business, that won’t matter much.
• Think strategically. When redeeming gift cards, you can also save money by using them strategically. With a gift card, you are more likely to get a discount or bonus if the store is already running a special promotion.
• Whenever possible, add it to an app. Depending on where you bought the gift card, you can redeem it for a credit to use at your convenience. As a result, you don’t have to worry about losing the physical card or not having it when needed.
• Sell your gift card. Gift cards can be cashed out at the company where they were purchased or via sites like Raise — if your state allows it. Normally, you can cash out a gift card balance under $10, but you may want to inquire with the retailer. Additionally, Target offers instant store credit when you trade unwanted gift cards.

Tips for When You Give a Gift Card

• Consider the person’s likes and dislikes. Your gift card will likely go unused if you give it to someone who isn’t interested in the store or service or can’t use it. If you’re unsure, choose a retailer with a variety of items, like Walmart or Target.
• Choose something convenient for them. If your recipient lives far from a theme park or museum, a gift card or membership may remain unused. Additionally, don’t give gift cards that would exceed the budget of the recipient. An expensive meal at a high-end restaurant or at Louis Vuitton will not be covered by a $25 gift card.
• Shop local. Supporting small businesses can be as simple as purchasing gift cards from them. Although this may not save you money, it is an excellent way to make sure that your money is going to support local businesses and communities. This is also a great way to boost the revenue and business of a family or individual you know personally.
• Take advantage of sales. When you buy gift cards at a discount, you can save money. Their value remains the same even though you’ll pay less for them.
• E-gift cards may be a good option. Gift cards sent by email or text are ideal for digital natives because they make it easy for them to load the funds directly into their digital wallets.

Frequently Asked Questions About Gift Cards

1. Exactly how do gift cards work?

There is no difference between gift cards and cash. Typically, the buyer loads a specific amount onto the gift card, and then the recipient uses it to make purchases.

Generally, gift cards are associated with specific businesses, such as Starbucks or Amazon. But some credit card companies, like Visa, offer their own debit cards as well.

2. Do gift cards have an expiration date?

All gift cards are expected to expire at least five years after activation, according to the Credit Card Act of 2009.

Also, the inactivity should be mentioned and made public after 12 months of non-use. Inactivity fees can only be deducted once a month. Despite the expiration of the card, gift card funds do not expire. A user must be informed about the fees in advance.

3. Is there a gift card that doesn’t expire?

It is possible for gift cards to never expire in some states. A Mastercard or American Express, for example, gift card never expires. There may also be a date by which the physical card needs to be replaced. You can request a new card by calling the number on the back of the card.

4. If I have a PIN on a gift card, can I get cash from it?

As long as gift cards did not have a PIN, they were treated like credit cards at the point of sale. It is possible to use prepaid cards in either fashion since they usually have a PIN.

In 2013, the Federal Reserve mandated that everyone could get a PIN for a general-purpose gift card, which allowed them to select what type of transaction they would like to make. Some consumers, however, thought they could withdraw cash using the PIN on their Visa gift cards through ATMs or merchants. However, they cannot. Using a PIN on a gift card allows you to make debit transactions.

With gift cards, you can’t withdraw money from an ATM or get cashback from a retailer, but Visa reloadable prepaid cards do permit these transactions.

5. Who purchases gift cards?

You can sell gift cards to companies that buy and sell gift cards for cash if you end up with gift cards you won’t use. You may want to consider Gift Card Granny, CardCash, or Raise as some of the more noteworthy options.

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