The economics of unused gift cards
thehustle.co
thehustle.co
When I do get a gift card, what I end up doing is giving it to someone else who would appreciate it more. Or, if I can't find such a person (it tends to be 50-50), then I sell it through a local classified ad site for 50% of the value it contains.
Direct cash is infinitely better than deciding where someone much spend money at.
No gift at all and the promise of a good moment together is even better than that. Enjoy your time, not your possessions.
Good old consumerism in action.
If you know that your mother enjoys that particular spa, then I agree, it's a good, thoughtful gift -- basically that's the right way to use gift cards/certificates.
That's not how they're used for the most part. For example, 90% of the time when I'm given a gift card, it's for Amazon -- the thought behind that is precisely the same as it would be for cash, except that I am now constrained to using it on Amazon rather than somewhere else that may be a lot better for me.
For people who think of them that way, it just raises the question -- then why not give cash? Cash is much more useful.
If she takes 50 bucks and uses it in groceries it’s because she needs them. If you arrange a spa day outright then it’s not a question of money.
I'd rather get cash from my proverbial rich uncle, but I'd prefer a gift card from a friend. honestly my favorite way to exchange presents with friends is just to tell each other exactly what we want. then we each get a useful thing that reminds us of our friendship.
For the most part Christmas gifts are about balancing an equation by buying each other shit you don’t need and then hoping your spend cancels each other out. If it doesn’t, resentment and drama.
You can both spend/save the exact same money together by buying nothing. Club together on food, drinks, hospitality. Get some good ingredients and booze, some stuff for the kids, and then help make it happen.
Don’t bother trading things you would have already bought yourself.
Unless you’re a child.
I agree entirely with this. This is why my social circle (and most of my family) has a "no gifts" rule around gift-giving holidays and events (children excepted). But not everyone follows that.
I’m happier now than I was playing their game. The only time I do gifts now are because I genuinely, altruistically, want to share something.
And that is the sort of gift that actually has meaning!
I frequently give gifts to my friends and family, but rarely around some sort of event. It happens when I see something that I know a particular person would love, so I get it and give it to them.
I think that makes the gift truly meaningful. Not because its actually personalized, but because it demonstrates that I was thinking about them at a time when I was not expected to be.
In my family, for Christmas, everyone fills out a short questionnaire (hobbies, goals, what are you learning, where are you going, favorite authors/genres) then we use the questionnaires to guide gift giving. This way, there's still room for creativity and thoughtfulness in gift giving, but it's guided by the responses. Plus, it's fun to read everyone's answers and you can give gifts that line up with multi-year trends after a while.
If we boiled everything down to sheer logic we wouldn't celebrate Christmas at all. The point isn't necessarily what makes the most "sense," it's about tradition and good feelings.
But we no longer feel like we have to buy something for the other on some arbitrary date looks like a birthday or holiday.
It's so freeing. Bonus: we have less stuff in our house.
Trying to implement this with my extended family. We still but gifts for the kids though, they enjoy it.
your system sounds nice too though, just a little more effort than I want to put in.
Wouldn't the much better gift be to take them out for a meal at their favorite restaurant?
> The cash might just be used at the gas pump or buying groceries.
If someone gives me some money and I spend it on gas or groceries, then I clearly need the gas or groceries the most at that time. I don't see the problem with that.
But my main point, really, is that both cash and gift cards are (generally speaking) terrible gifts because they don't have the one thing any great gift needs: to indicate that the person cares about you enough to put some thought into the gift. The actual gift isn't the thing itself, it's the time and attention put into the thing.
But between the two poor choices, I consider cash to be the better option.
You're thinking of gifts for local friends/relatives. Think of your grandmother who lives 5000 miles away and has never been on a plane. Can she take you out to eat on a whim? No. But she can connive to get you to take yourself out to eat, and think of her as you do so, making you perhaps a little more likely to take a 5000-mile flight to visit her one day. This is the use-case that gift-cards serve.
That's a reasonable use case (although I still think there are much better options).
However, that's not the sort of use case that is usually involved when people give gift cards.
What I do: buy a discounted expensive item in bulk and hand it out as a gift (e.g. Happy Socks).
Cash is often spent on normal things (or things the giver might disapprove of e.g. alcohol) rather than "something nice" -- Gift Cards are a good middle ground between paying someones electric bill or getting them a jacket that doesn't fit or suit their wardrobe.
And about selling gift cards. You can get more than 50%, if you sell for Bitcoin etc on /r/BitMarket.
That fact is one of the main things that I value about gifts!
> You can get more than 50%, if you sell for Bitcoin etc on /r/BitMarket.
I don't want Bitcoin. I can get more than that other ways, too, but they all involve more time and effort, turning the card into a burden.
Selling the card locally for half off means that I can unload the thing quickly without any real hassle.
I'm happy for you.
Me, I've gotten some baffling gifts.
In other words, I think of gifts as a kind of communication.
But a few years ago, I was given a gift card to Macy's. I don't shop at Macy's and had a hard time finding something to get. Every single thing I looked at, I could get at half the price basically anywhere else. I ended up buying some kitchen stuff, but felt like the giver's money was wasted.
The worst gift card in my experience is a Visa/MC/AmEx gift card. It is often a pain to deal with them if the balance on the card isn't enough to cover a purchase unless the business you're spending it at is capable to splitting a purchase over multiple credit cards and the cashier knows how to do that.
Back when I worked at a grocery store, if a customer paid with EBT, we just pressed the EBT button and the register would charge only the food total to the card and then ask for more money. If they paid with a credit card, we just pressed the credit card button and then swiped the card and the balance of the transaction would get charged.
What a lot of my fellow cashiers didn't know, because they were never explicitly told during training, is that they could specify the amount to charge to the credit card by typing the amount and then pressing the credit card button.
If a customer had a $20 Visa Gift card, but had a $30 purchase, and they tried to pay with the gift card, but the cashier only pressed the CC button without specifying to only charge $20, then the card would simply get declined with no message about how much was remaining on the card. And due to lack of training, even if the customer knew how much was on the card, the cashier might not know how to only charge the $20.
It's easy to redeem them immediately and have that balance in my account forever.
I don't give gift cards but I guess they're OK if the person knows I shop somewhere semi-regularly for fun type stuff. e.g. REI for me. Maybe it will lead me to buy something that catches my eye but I don't need so I'd otherwise pass on.
Red Lobster I would be thinking "I didn't know you hated me so much." :-)
Otherwise, I just give my niece and nephews cash.
(Personally, I hate gift cards. They're usually at a place I'd never shop, so I end up buying something of marginal value.)
This would probably be the one-and-only time that gift cards are really "better than cash."
https://www.npr.org/2019/12/16/788587668/the-efficient-chris...
I'm not shocked by a lot of things, but I guess I am kind of shocked that someone would have so much money that it's not even worth their time to keep it in their wallet until the next chance they have to give it to someone else who would appreciate it.
The article says that in the general case, the company only counts the card as income once it is redeemed. Until then it is counted as a liability.
This makes a little sense, since they still owe you goods and services, but (1) aren't the goods/services they are offering worth less to them than the value on the card, and (2) aren't they generating interest off that?
Next, it says that under a 2009 law, the companies can start counting it as income sooner (6-24 months), and the accompanying article suggests that this is good for the companies' bottom line. But wouldn't it really be the opposite? Before they counted it as income, surely they had all the benefits of the money and it's not even being taxed as income yet? Wouldn't they want to hold off on counting it as income as long as possible?
Legally, there's also the concept of escheatment, which depends on the country/state that tells a company what to do with the unused balance. In some cases, the government may claim this balance.
To your question about paying income tax on income, most tax codes would require the companies to pay tax on the amounts when they receive the cash rather than when they satisfy the obligations. So it's likely that they've already paid tax on this amount.
In markets that don’t regulate otherwise, a typical program will count unused balance as breakage 12 months after issue. The typical balance on such a card would amount to unspent change from a purchase. In regulated markets, they’ll just follow whatever the regulation is, which sometimes requires charging an “account maintenance” fee, instead of just removing the balance.
What happens to the money before it is either redeemed or taken as breakage depends again on the specifics of the program and the jurisdiction. Sometimes it will be required to be held in a trust, or in some other form of escrow. Often this will preclude the possibility of earning interest.
Sometimes the gift card provider and the merchant are different parties. An example of this would be a mall that sells a gift card that you can use to redeem at any store in the mall, or a visa gift card. In this case, the program operator does not simply exchange the balance for stock, they have to settle cash with the merchant.
Loyalty liability is different again, because that’s liability that you never received a direct payment for in the first place.
The one huge mistake that this article makes is that it claims the breakage income is 100% profit. This ignores the costs of operating the program, which is usually millions of dollars. Small retailers would receive trivial breakage income, and would not necessarily even cover program costs with it. Medium size retailers may or may not generate a profit on breakage, large retailers likely do, but their program expenses are also enormous. The real value to the business is customer acquisition.