Consumers waste up to $3 billion in unspent gift cards a year
A prepaid gift card may be a popular holiday present, with more than half of U.S. consumers purchasing one this season, but that doesn't mean they're used wisely: About $3 billion in cards will go unredeemed this year alone.
As much as 3% of gift card dollars are never redeemed, according to an estimate from the Mercator Advisory Group. In 2019, consumers spent about $98.6 loading up gift cards, which means almost $3 billion was left on the table, according to C. Sue Brown, director of the group's prepaid advisory service.
"The biggest waste tends to be in your retailer gift cards that for some reason the recipient chooses not to spend," Brown told CBS MoneyWatch. "I would say that cases where people aren't spending all the dollars are much less than in the past, but there is still a percentage — between 1 and 3% — of stores' sales that goes unused," she said.
Why so much waste?
Some giftees forget about or misplace cards, while others don't shop at the outlets at which their gift cards are valid.
"It's neglect, forgetfulness, they didn't want to shop there in the first place. Sometimes people give their favorite store without regard whether that makes sense for the other person — sometimes I physically misplace it," said Daniel Kline, an analyst for The Motley Fool.
"People give me Starbucks gift cards, and I go to Starbucks all the time, but if I don't remember to immediately put them in my phone on my Starbucks balance, they might sit around. A $10 gift card doesn't move my needle that much, so I forget about it and it gets lost," he added.
Others partially redeem their gift cards but don't always spend the balances, leaving money on the table.
A win for retailers
Either way, retailers win, according to Kline. If gift cards aren't redeemed, retailers still profit. And stores count some of those giftees who do spend their balances as new customers.
"They draw people into your store, so there is every chance they are going to spend more, or at least be exposed to things you sell. It might also bring in a customer you don't otherwise foresee coming in," Kline said.
There is, however, a caveat. Under some states' unclaimed or abandoned property laws, corporations are required to report unclaimed funds, which are ultimately treated as state funds.
The solution? A new national holiday
National Use Your Gift Card Day, founded by public relations professional Tracy Tilson, will debut on January 18. It's designed to serve as a reminder to those owners of gift cards to spend or donate them in order to reduce wasted gift card spending.
"We all do it! We receive gift cards that were at the top of our wish lists for the holidays with every intention to use them and then they're forgotten," Tilson said in a statement. "National Use Your Gift Card Day is a reminder for consumers to use their gift cards so not a single dollar goes unspent."
Those consumers that don't wish to spend their gift cards can also user services like Cardpool, which allows individuals to buy gift cards for up to 35% off or sell them for up to 92% of their value.
The month of January is a good time for consumers "to get organized and square away their finances on all fronts," Tilson told CBS News. The event will be observed on the third Saturday of every January.
Participating retailers include AMC Theatres, Applebee's, Kohl's, Macy's and Saks Fifth Avenue. Some will make in-store offers and deals and incentives to encourage shoppers to spend money.