$5 billion in Gift Card Breakage in 2009

Spend all your gift card money! Dont give it back!

Companies make $5 billion in gift card breakage.

In a wonderful article written by the New York Times today, it is revealed that gift card breakage remains as high as ever. Gift Card breakage is defined as the money left on gift cards that never gets spent. As one can imagine, breakage occurs in many ways but there are two common instancs. The most common causes of breakage are called the "left in the drawer" and the "$3 left on the card" scenarios.

The "left in the drawer" approach is fairly self explanatory. Remember the Nordstrom gift card that you put in a drawer three years ago? You are not alone. Despite laws that require those older gift cards to still be valid, millions of consumers assume they are expired and do not spend them. Welcome to massive breakage.

The other primary cause of gift card money never being spent is the "gift card remainder". Easy to explain, you are given a Patagonia gift card for $200 and you buy a jacket with it that cost $196. Guess what usually happens to that $4? That's right. Breakage.

Two things to remember. One, the gift cards do not expire. Get them out of the drawer and spend them. Two, buy somehting that costs a bit more than the gift card you are given. Don't give the money back to the merchant!