Do Gift Cards Expire? Legal Frameworks and Consumer Choices 

Gift cards are commonly used tokens of love and appreciation. However, with the increasing popularity of gift cards as tokens of love and appreciation, it becomes important to understand their complexities, especially regarding the question of whether gift cards expire.

Recipients often face the common dilemma of gift card expiration. The reasons behind this involve both financial management and security considerations. 

Delving deeper into exemptions unveils specific conditions that allow gift cards to bypass the general expiration rule. Moreover, exploring financial intricacies like inactivity and service fees is essential to avoid potential pitfalls. 

The legal regulations regarding gift card expiration have nuances. Furthermore, users are curious about where the money from expired gift cards goes, which involves unclaimed property programs.

 This article will elaborate on various details of gift card expiration, including: 

• Gift card regulations focus on the Credit CARD Act 2009 and federal laws protecting consumers from undisclosed fees. 
• Reasons for gift card expiration, examining accounting complexities, revenue recognition, and specific conditions allowing exemptions. 
• The resources where money from expired gift cards goes, covering unclaimed property programs, retailer profits, and consumer options for using or reclaiming expired cards. 

Pique your interest? Let’s get straight into it without further ado. 

Expired Gift Cards-Facts & Figures 

Unused gift cards present a significant issue, with approximately $3 billion worth of gift cards going unused in the US annually.  

Forgetfulness is the main factor, with 46% of consumers admitting to neglecting their gift cards.  

Consequently, 3% of gift cards in the US are unused each year, contributing to a $15.6 billion valuation of the unused gift card market in 2021.  

Globally, Australians leave AUD 70 million ($51 million) worth of gift cards unused yearly.  

Furthermore, the impact is widespread. Over 50% of Americans let a gift card expire in 2018, and U.S. consumers left $2.5 billion unspent in gift cards. 

These statistics emphasize the necessity of increased awareness and responsible management of gift cards to ensure their value is realized. 

Statistic	Value
Annual value of unused US gift cards	$3 billion
US consumers with unused gift cards	51%
Unused UK gift cards (2015-2020)	£2 billion ($2.7 billion)
Consumers forgetting to use gift cards	46%
Unused gift card market value (2021)	$15.6 billion

How Many Years Does It Take for a Gift Card to Expire? 

Gift cards typically last five years, as the Credit CARD Act 2009 mandates. However, issuers may charge an “inactivity fee” if the card remains unused for a year.  

While federal law provides this five-year protection, it’s crucial to check the terms and conditions, as state regulations and certain circumstances may affect expiration dates.  

Recipients are advised to use gift cards within a reasonable timeframe to avoid potential fees and ensure the total value. 

Why Do Gift Cards Expire? 

Gift cards can expire due to a lot of factors; some of them are mentioned below.

1. Accounting Methodology Disparity 

Gift cards expire due to the discrepancy between cash and accrual accounting.  

While local retailers using cash accounting focus on immediate cash transactions and have no urgent need for expiration, larger companies employing accrual accounting must address the creation of “pre-paid sales” liabilities.  

Expiration dates are enforced to manage these liabilities for accurate financial reporting. 

2. Balance Assets and Liabilities 

The introduction of expiration dates on gift cards balances the equation of assets and liabilities.  

In contrast to cash transactions using gift certificates, selling gift cards creates a commitment known as “pre-paid sales” liability.  

This commitment influences a company’s financial dynamics until the card is redeemed or expires. In this context, expiration becomes a tool for managing this delicate financial balancing act. 

3. Simplify Revenue Recognition Complexity 

The complexity of recognising revenue from gift cards lies in the delay caused by unredeemed cards. Expiration dates are implemented to streamline revenue recognition.  

Companies face hurdles in reporting revenue until the associated “pre-paid sales” liability is removed. Expiration serves as a solution to simplify financial reporting and accurately recognise revenue. 

4. Stock Market Perception 

Unredeemed gift cards influence a company’s perception of the stock market. Investors and analysts consider these liabilities when assessing financial health, impacting stock prices and executive compensation. 

 Expiration dates are strategically introduced to manage these perceptions, aligning with broader financial strategies. 

5. Accounting Strategy 

Expiration dates are implemented as an accounting strategy to address the challenge of unredeemed gift cards.  

Through mechanisms such as “service charges” or “maintenance fees,” companies reduce the “pre-paid sales” liability. This allows the companies to recognise the gift card’s value as revenue.  

While this strategy causes customer dissatisfaction, it adheres to accounting principles and helps in efficient financial management. 

Which Gift Cards Do Not Expire? 

The following exemptions provide specific conditions for gift cards to avoid the general rule against expiration dates. 

1. Promotional Programs 

Gift certificates or cards distributed without charge under awards, loyalty, or promotional programs are exempt from expiration rules. 

2. Volume Discounts for Fundraising 

If the expiration date is 30 days or less after the sale, gift certificates or cards can be donated or sold below face value at a volume discount to employers, nonprofits, or charitable organisations for fundraising purposes. 

3. Perishable Food Products 

Gift certificates or cards issued for perishable food products are exempt from the expiration rules. 

What are Inactivity and Service Fees? 

After a year of not using it, a gift card will probably start charging monthly fees (dormancy fees).  

However, the law says it’s the seller’s job to tell you about these fees before buying the card, whether you’re buying it in person, online, or over the phone. 

However, according to federal law, most gift certificates and gift cards sold by retail sellers for use with their affiliates cannot contain an expiration date or service fee. 

Notably, gift cards that can be used with multiple unaffiliated sellers may have an expiration date, provided it is printed on the card.  

While dormancy fees on gift cards are generally not allowed, there is an exception for specific situations, such as when the remaining value on the card is $5.00 or less, and dormancy fees are $1.00 or less per month.  

Therefore, consumers need to know the terms and conditions of gift cards to understand any potential inactivity or service fees.  

Is it Legal For the Gift Cards to Expire? 

Yes, it is legal for gift cards to expire, but federal law provides certain protections for consumers.  

According to the Credit CARD Act of 2009, gift cards typically last for five years and cannot contain an expiration date or service fee if sold by retail sellers for use with their affiliates. 

 However, there are exceptions, such as gift cards that can be used with multiple unaffiliated sellers, which may have an expiration date printed on the card.  

Furthermore, state laws also play a role, with variations in regulations regarding gift card expiration and fees. To protect their rights, consumers must be aware of these laws and the terms associated with gift cards. 

Which States Don’t Allow Gift Cards to Expire? 

Various states have enacted laws to protect consumers by regulating gift card expiration dates in the United States. 

The Federal Trade Commission (FTC) mandates disclosure of expiry dates and fees, while federal law prohibits expiration dates on gift cards for at least five years from the purchase date or the last fund loading.  

Moreover, Specific state laws play a crucial role in regulation variations.  

For instance, California, Colorado, Maine, and Montana have stringent rules, such as prohibiting expiration for specific cards or establishing a minimum redemption period.  

Hence, businesses and consumers need to stay informed about the regulations in each state to ensure compliance and avoid legal consequences. 

Where Does Expired Gift Card Money Go? 

In the aftermath of gift card expiration, the unused money can go in different directions, affecting consumers, retailers, and public initiatives. 
Here are the details of where expired gift card money may end up. 

1. Unclaimed Property Programs 

After gift card expiration, funds are treated as unclaimed property, particularly in 19 states like Delaware. 

Retailers collaborate with state unclaimed property programs, aiming to return unspent gift card money to consumers through these initiatives. 

This process ensures that the unclaimed funds are returned to individuals rather than being retained by the companies. 

2. Retailers’ Breakage Profits 

Retailers calculate “breakage,” estimating the portion of gift card liabilities unlikely to be redeemed. 

Breakage becomes a significant profit source for companies, contributing substantially to their overall revenue. 

An example is Starbucks, which reported $212 million in revenue from breakage in 2022. 

3. Consumer Reclamation Efforts 

All 50 states and the District of Columbia host unclaimed property programs, facilitating consumers’ reclamation of unspent gift card funds. 

Through platforms like MissingMoney.com, individuals can search for and reclaim funds owed to them, including those from expired gift cards. 

This consumer-oriented approach ensures that individuals have avenues to retrieve their unused gift card money. 

4. Public Service Contributions 

Unclaimed funds, not reclaimed by individuals, contribute to state initiatives and public service programs. 

States argue that companies should not retain funds for services not provided, redirecting unclaimed money toward public welfare. 

This mechanism ensures that expired gift card money, if unclaimed, serves broader societal needs rather than remaining with the issuing companies. 

Can You Still Use Expired Gift Cards? 

If you have an expired gift card, you can still use it. Contact the issuer through their official channels and ask if they can extend the expiration date.

Many issuers may provide solutions like an extension or reactivation. This extension allows you to use the remaining balance. 

Communicating directly with the issuer, using their website or customer support, is crucial to understanding the available options for your specific situation.  

Remember that different issuers may have different policies, so exploring these options directly can help you make the most of your expired gift card. 

Where Can You Find Gift Cards You Won’t Forget to Use? 

Send Credit offers an unparalleled range of gift cards, boasting a comprehensive range at meagre rates. From seamless buying experiences to convenient redemption options,  

It aims to elevate the custom of gifting and ensure a new dimension in the world of thoughtful presents, saving customers from gift card frauds.

Feel free to check out, choose, and indulge in the joy of giving with Send Credit’s exceptional gift card collection. 

Final Thoughts 

In a nutshell, exploring the world of gift cards involves understanding legal protections, financial intricacies, and consumer choices. The Credit CARD Act of 2009 sets the stage for transparent policies. Exemptions provide flexibility, allowing certain gift cards to defy expiration. 

Moreover, Expired funds find diverse paths, benefiting individuals or contributing to retailers’ profits. With knowledge of specific policies, consumers can confidently navigate the gift card landscape, ensuring that the joy of giving remains unburdened by expiration uncertainties.