Why Do Gift Cards Expire?

Why Do Gift Cards Expire?
"Sorry, we can't accept that card. It expired over a month ago."

Beats the shit out of me. I have nothing for you. No answers; zilch.

It should be cut and dry. You pay someone a specific amount of money now, for goods/services to be rendered in the future. It's seems simple. but instead, it's confusing.

After one year, most gift cards expire, while some continue to lose value. Some of the best stores will still honor the initial value. But why do they lose their value anyway? It seems like a total scam.

"It isn't obvious why companies do this; it hardly seems worth the bad PR."

Gift Cards can be a great idea, but they have to be used right away. The problem is we want to save them for a sale, or for something we've been saving for. When we get around to using them there is always an issue.

My experiences have been mixed lately. Keg Works said they set a date for expiration, and I was a month over that date, but that they would still honor my card. They looked up the number and gave me the full $100 credit. "Sweet." I spent the money that day!

Another company, VISA just informed me that I crossed over the one year mark and have been losing value every 30 days. A $50 card was now worth $43. I had been saving it for a bigger purchase and was adding a few together, now I have less than I thought.

Bottom line is I can't wait any longer to spend these plastic traps. You can't either. They might have initially been a gift, but the only people gaining from our procrastination now, are the companies who continue to collect, more of our money.

The following might make more sense of things, but it won't make you feel better about losing your money.

"You can imagine how annoying this must be. They can see the money; it's sitting in their bank account. But they can't report it as revenue: as long as the pre-paid sales liability remains on their books, they can't say that the money is theirs. Granted, this pre-paid sales liability is an accounting fiction, but it's a fiction that matters. It matters to accountants, and auditors, and investors: to the people who determine the company's stock price and reward its executives.

So companies that issue gift cards find ways to make them expire. When a gift card loses value to a "service charge", the company isn't actually performing a service for you; when a card loses value to a "maintenance fee", there isn't any actual maintenance being done on it. All that's happening is that the company is removing some of the pre-paid sales liability from its books, so that it can recognize the money you paid for the card as revenue.

When gift cards expire, accounting trumps public relations, customer good-will, and common sense."

--Steven W. McDougall

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Tags: Expiring, Gift Cards

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