What Happens to Unused Gift Card Cash?

Did you ever receive a gift card and set it aside, then find it months or years later? Plenty of people do. Brian Riley, research director of the bankcards practice at the Tower Group, Needham, Mass., says gift card sales are likely to approach $100 billion this year, but nearly 10% of that is likely to go unused.

If you don't use your gift card cash, it either goes back to the card issuer, or to the government in the state where the card issuer's headquarters is located. Some states require card issuers to return all or a percentage of unspent balances to the government as unclaimed assets. In other states, card issuers can keep the money.

State laws differ considerably. "Florida requires the money to go to the state, while Georgia allows the company [issuing the card] to take it," Riley says. In cases where a small, often unusable balance remains on a card, "California requires a cash refund to the cardholder for balances under $2, while other states don't, and cardholders lose those small balances.

"Sometimes, when residents in a state have unused gift card balances, that state requires out-of-state card issuers to return a portion of those balances. That's impossible if a card issuer can show it doesn't know who holds the gift cards.

For states and card issuers, these balances are worth fighting for. Nanette Byrnes, a senior writer for Businessweek, New York, writes that in the past two years Best Buy, which issues cards from Virginia, added $135 million in unspent gift cash to its operating income.

For gift card buyers and recipients the lesson is clear: Don't let the government or a card issuer have your cash. Do your homework before buying a card and get one with favorable terms. And when you receive a gift card, spend the cash right away.