It's been 12 days since Christmas. Go redeem your gift cards!
That's my takeaway after a chat with Brian Riley, a senior research director in the retail banking and cards practice at TowerGroup. He studies the retail industry and calculates that in this new year, $2 billion in gift-card purchases will go unredeemed. Some will be lost. Others misplaced. And some recipients are simply not motivated to shop at certain retailers.
Believe it or not, the $2 billion figure will represent an improvement. Riley calculates that since 2005, $41 billion has gone unredeemed.
It's not that people have gotten better at cleaning out the junk drawer. The improvement is attributable to Title IV of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, which eliminated many junk fees and voided expiration dates on the cards of less than five years from purchase date.
"At the peak in 2007, 10 percent of all dollars loaded did not get used," Riley told me. He said that included $600 million left in kitchen drawers, $2.6 billion in fees (for example, being charged 50 cents just to check the balance on the card), and $3.5 billion in lost value because of expirations.
So where does the money go? The answer depends on a patchwork of state laws.
Recognizing that some retailers have moved unredeemed amounts off their balance sheets and reclaimed the amounts as revenue, certain states (themselves looking for new sources of cash) have seized the value for their general coffers. Riley cites New York and New Jersey as examples of this approach. (The Wall Street Journal reported that in 2008 - the most recent year for which data could be obtained - New York state collected $9.6 million in unredeemed gift cards and returned about $2,150 to the rightful owners.)
That states should reap a windfall when gift recipients leave money on the counter doesn't seem fair. Nor does it seem right that merchants should ring the register without giving up anything of value. Riley agrees.
"From the way I look at it, it's the consumers' money," he said. "The whole nature of gift cards is that you are tendering money to retailers and asking them to hold onto it until you are ready to use it. Just because you haven't used it doesn't mean it's no longer yours."
Now you know why the gift-card kiosks have grown larger each year and become permanent fixtures. They're an enormous profit center.
For guidance in Pennsylvania, the attorney general's website says:
"Under Pennsylvania law, unused gift certificates are turned over to the Pennsylvania Department of the Treasury as unclaimed property. The business must turn the gift certificate over two years after expiration date. If there is no expiration date, then it must be turned over five years from the date of issuance. You may claim certificates from the Department of the Treasury by calling 1-800-222-2046. Thus far, the Pennsylvania state treasury has collected more than $2.7 million in unredeemed gift certificates and is currently seeking the rightful owners."
That collection falls under the purview of state Treasurer Rob McCord, whose solution is common sense.
"When consumers buy a gift card, they do so with the reasonable expectation that the recipient will receive something in return; they don't buy gift cards from a company as a charitable contribution," McCord told me in an e-mail. "Ultimately, it's important for consumers to use their gift cards sooner rather than wait and possibly forget them. Think about it - if you got $20 as a gift, you would spend it as opposed to putting it away in a drawer."
Which raises a different solution - just giving cash.
"The thing to look out for is whether your gift cards have expiration dates or fees," McCord said. "If they do, your gifts may legally become unclaimed property. We hope a business would honor an expired gift card, but if they don't, consumers should call us or visit patreasury.gov and we will try to help."
Go redeem them.