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Perhaps I’m in the minority in finding all of this a bit too complicated. Then, I need to find a retailer where the people at the register won’t look at me cross-eyed when I request that they split the transaction between the gift card and another form of payment. But with the gift card like the Citi Visa that I recently received from Verizon, I have to remember to put it in my wallet and take it out at a store. I can drop a check in the mail to my bank in about two minutes. But with a card, you can spend it immediately.” “Consumers are more interested in getting a card than a check. “It’s the convenience,” said Cletis Hoffer, treasurer at Young America, a marketing company that specializes in rebates and has studied the issue in focus groups. Why is this happening? Because you wanted it to happen, of course. So you may end up with the cards whether you want them or not. But recently, companies have started sending rebates in the form of gift cards, instead of old-fashioned paper checks. And yes, most of them do tend to keep it, though some states may try to seize the money as unclaimed property (which leads many companies to place subsidiaries in friendly states to try to avoid this).Įven as gift cards exploded in popularity over the last decade, it was reasonably easy to avoid getting them, as long as you put together a specific enough holiday wish list for friends and family. But they still record the revenue once they’re certain, based on historical redemption patterns, that most of the unspent money from years ago will stay that way. Retailers will generally still let you redeem your gift card many years after you received it. Breakage can be total when a retailer goes out of business. Not every big retailer or bank discloses it, but Best Buy was kind enough to note that it kept $38 million in breakage in its most recent fiscal year. And for big companies, breakage can add up to real money. This is how some of the people in the industry talk about gift cards when they think consumers aren’t listening. If you count 10 to 12 percent breakage in your calculations, the site contends, the gift card display can become the “most profitable square foot of space in the place.” It isn’t just a break-even proposition either, according to the people behind. The money then reverts back mostly to the retailers and banks that loaded the plastic initially. This year, nearly $5 billion of the money that well-meaning givers have put onto gift cards will go unspent, according to TowerGroup, a financial services consulting firm. It did away with all consumer fees, other than the ones you pay to purchase and load the gift card in the first place.īut a big problem remains, and it’s awfully hard to legislate away. American Express, which issues cards that are good at any retailer that accepts its plastic, went even further. That is fine as far as it goes, though most major retailers already follow these rules. They prohibit fees for cards that have been inactive for less than a year, outlaw expiration of funds within five years of when someone has loaded the cards with money, and call for clear and conspicuous disclosures. Last month, the Federal Reserve proposed new guidelines for the industry, rules that legislators had outlined in the sweeping credit card legislation that passed earlier this year. And this year, some of the changes in the card world seem favorable at first glance.
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Like it or not, gift cards are now a fixture of the holiday season.