Gift Card Graveyard

San Antonio Express-News
Dec. 6, 2007
By Meena Thiruvengadam

Gift cards are a gift of choice again this holiday season, but you might want to regift last year's cards before you rush out to shop for new ones.

Despite spending an estimated $80 billion on gift cards in 2006, consumers have yet to cash in $8 billion in cards they received, according to TowerGroup, a Massachusetts-based research firm.

Of the gift cards bought this year, TowerGroup estimates that $7.8 billion will go unspent.

Sifting through her beige leather wallet, University of Texas at San Antonio graduate Kim Palmer was able to unearth at least two unspent gifts of choice: one to Pier 1 Imports and another to Linens 'n Things. Both were birthday gifts received in June.

"I'm one of those people who likes to shop around a lot before I make a purchase, so I usually hang on to them for a while," Palmer said.

The Pier One card hasn't yet been enough to lure her into the retailer's store and can't be redeemed online. After spending part of the Linens 'n Things card, Palmer slid it between several credit cards in her overstuffed wallet.

"I keep forgetting it's in my wallet when I go there," she said.

An October survey by the Consumer Reports National Research Center found that 27 percent of last holiday season's gift card recipients still have at least one unused card sitting around. The figure is surprising because gift cards increasingly have been replacing ugly sweaters, useless trinkets and fruitcakes under Christmas trees across the country.

Spending on gift cards during the holiday season -- one of the busiest for gift card purchases -- has climbed from $17.2 billion in 2003 to nearly $25 billion last year, according to the National Retail Federation. The federation estimates that consumers will spend a record $26.3 billion on gift cards this holiday season.

Nearly 57 percent of shoppers plan to buy them, and 53 percent of people hope to receive them, making gift cards one of the most popular items on this year's Christmas wish lists, according to the federation's data.

"Many consumers have held off on making purchases solely for themselves this year, so they're looking at gift cards as a way to purchase that something they've been looking at all year long" said Kathy Grannis, a federation spokeswoman.

But if everyone loves gift cards so much, why aren't they spending them?

Ashley Sumners, a former teacher in Texarkana, still has a $100 Tuesday Morning gift card she received as a wedding gift in 2005.

"I have gone in several different stores in different cities to try to find something but just haven't found anything I want," the 26-year-old Fort Worth native said. "I feel bad about not spending it, but that's not exactly a store that 20-somethings shop at." Like Sumners, 35 percent of consumers surveyed by Consumer Reports said they didn't spend gift cards because they couldn't find anything to buy. Nearly 60 percent of survey respondents said they didn't have enough time to shop. More than 33 percent said they either lost or forgot about the cards or that they expired.

So what happens with the money attached to all those unspent cards?

When a retailer sells a gift card, they account for it as a debt owed to the card's holder. That debt morphs into sales revenue when the card is used or expires.

For retailers such as Barnes & Noble and Best Buy, whose gift cards never expire, the scenario becomes more complicated.

The companies legally must keep unspent gift cards on their books as a liability until they are spent or are deemed very unlikely to ever be redeemed.

"It's a little bit of an accounting headache because it's sitting out there," said Tom Burke, executive vice president of e-commerce at barnesandnoble.com. "But we want customers to be able to wait however long they want to wait to make a purchase." At any given time, an estimated 10 percent of Barnes and Noble gift card dollars are out there waiting to be spent, Burke said.