Time to Spend

Submitted by Guy Williams on February 8, 2022

It is not often that I advise quick spending, but gift cards are an exception.

During the holiday season the National Retail Federation estimates that consumers bought twenty-eight billion dollars worth of gift cards. Starbucks alone sold three billion dollars worth of cards. This is great for the retailer since consumers in effect made an interest-free loan to whoever sold the card.

The other advantage to the seller is what they call breakage. This means that not all gift cards will be used so the retailer gets to keep the money. Last year Starbucks reported one hundred sixty million dollars of breakage income. I call breakage – consumers losing money.

Another unfortunate feature of gift cards is expiration dates. It has never seemed fair to me that gift cards should expire, after all the money was already paid. The longer before the cards are used the longer the merchant enjoyed an interest-free loan.

I am not calling retailers bad for selling gift cards. After all, last year 46% of consumers bought some form of gift card, so the customer clearly wants the product. It is only fair that retailers sell products that consumers want and make a profit in the process.

My suggestion is that the gift card recipient make an active plan to quickly use the cards. I say quickly because the longer you hold a card the more purchasing power you lose in today’s era of higher inflation. The other problem with holding on to gift cards is that they tend to get lost over time. I know that they are inanimate objects, but they must move when we are sleeping. I know that I have misplaced cards, only to either never find them or discover them usually just after they have expired.

My suggestion is to place the gift cards in a single highly visible place in your home. My other suggestion is to plan to use them within the next thirty days. Think of it as a Mardi Gras plan. Use the gift cards before Lent begins.

Finally, next year, if you buy gift cards consider a general-purpose Visa or Mastercard gift card which can be more quickly used for what the recipient really wants. You could also go old school and get a cash gift envelope from your bank. Cash never expires and always gets used.

So use the cards, preferably soon and avoid being a breakage victim.