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Gift card for a U.S hardware store

A gift card, also known as a gift certificate in North America, or gift voucher or gift token in the UK,[1] is a prepaid stored-value money card, usually issued by a retailer or bank, to be used as an alternative to cash for purchases within a particular store or related businesses. Gift cards are also given out by employers or organizations as rewards or gifts. They may also be distributed by retailers and marketers as part of a promotion strategy, to entice the recipient to come in or return to the store, and at times such cards are called cash cards. Gift cards are generally redeemable only for purchases at the relevant retail premises and cannot be cashed out, and in some situations may be subject to an expiry date or fees.

American Express, MasterCard, and Visa offer generic gift cards which need not be redeemed at particular stores, and which are widely used for cash-back marketing strategies. A feature of these cards is that they are generally anonymous and are disposed of when the stored value on a card is exhausted.

From the purchaser's point of view, a gift card is a gift, given in place of an object which the recipient may not need, when the giving of cash as a present may be regarded as socially inappropriate. In the United States, gift cards are highly popular, ranking in 2006 as the second-most given gift by consumers, the most-wanted gift by women, and the third-most wanted by males.[2] Gift cards have become increasingly popular as they relieve the donor of selecting a specific gift.[3] In 2012, nearly 50% of all US consumers claimed to have purchased a gift card as a present during the holiday season.[4] In Canada, $1.8 billion was spent on gift cards, and in the UK it is estimated to have reached £3 billion in 2009,[5] whereas in the United States about US$80 billion was paid for gift cards in 2006.[6][7] The recipient of a gift card can use it at their discretion within the restrictions set by the issue, for example as to validity period and businesses that accept a particular card.

Gift card sales are not limited to banks or retailers; such other companies as airlines, cruise ships, hotels, barber shops, train companies, theme parks, restaurants and other type of companies may offer gift cards as well.

History

[edit]

In 1932 the Book Tokens scheme was established in UK by publisher Harry Raymond.[8] The original format of the tokens was as "lick-and-stick" stamp-like vouchers, which were glued into gift cards and had to be removed by the bookseller redeeming the token. In the 1990s, this design was changed to a "currency-style" voucher, available in a number of different denominations.[9]

In 1994 Neiman Marcus introduced the gift card system in US using a payments infrastructure in late 1994,[10] though Blockbuster Entertainment was the first company to do so on a wide scale,[11] test-marketing them in 1995 and launching them around the country the next year. In the beginning, the Blockbuster gift card replaced gift certificates that were being counterfeited with recently introduced color copiers and color printers. Blockbuster's first gift card transactions were processed by what was then Nabanco of Sunrise, Florida. Nabanco was the developer of the first third-party platform for the processing of gift cards using existing payment infrastructure.

Neiman Marcus and Blockbuster were later followed by the Mobil gas card, which initially offered prepaid phone value provided by MCI. Kmart was next with the introduction of the Kmart Cash Card, which in the early generations provided prepaid phone time with AT&T. Later Kmart and Mobil dropped this feature, as it was not profitable for them. The Kmart Cash Card was the first replacement for cash returns when a shopper did not have a receipt for a gift. This practice of giving a cash card in place of cash for non-receipted returns is commonplace today with most merchants. From these early introductions, other retailers began to adapt a giftcard program to replace their gift certificate programs.

Function and types

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An assortment of gift cards, many from U.S. national retailers such as Best Buy, Target, and Home Depot.

A gift card may resemble a credit card or display a specific theme on a plastic card the size of a credit card. The card is identified by a specific number or code, not usually with an individual name, and thus could be used by anybody. They are backed by an on-line electronic system for authorization. Some gift cards can be reloaded by payment and can be used thus multiple times.

Cards may have a serial number, barcode, magnetic strip, which is read by an electronic credit card machine. Many cards have no value until they are sold, at which time the cashier enters the amount which the customer wishes to put on the card. This amount is rarely stored on the card but is instead noted in the merchant's database, which is cross linked to the card ID. Gift cards thus are generally not stored-value cards as used in many public transport systems or library photocopiers, where a simplified system with no network stores the value only on the card itself. To thwart counterfeiting, the data is encrypted. The magnetic strip is also often placed differently than on credit cards, so they cannot be read or written with standard equipment. Other gift cards may have a set value and need to be activated by calling a specific phone number.

Gift cards can also be individually custom tailored to meet specific needs. By adding a custom message or name on the front of the card, it can make for an individualized gift or be used as a gesture of appreciation towards an employee.

Gift cards are divided into open loop or network cards and closed loop cards. The former are issued by banks or credit card companies and can be redeemed by different merchants, the latter by a specific store or restaurant and can be only redeemed by the issuing provider. The latter, however, tend to have fewer problems with card value decay and fees.[12] Card value decay is less of an issue since the Credit Card Accountability Responsibility and Disclosure (CARD) Act was passed by the US Congress in 2009. Inactivity fees and card expirations are both limited by the new law.[13]

In either case the giver would buy the gift card and may have to pay an additional purchase or activation fee, and the recipient of the card would use the value of the card at a later transaction. A third form is the hybrid closed loop card whose issuer has bundled a number of closed loop cards; an example is free gift cards for a specific shopping mall.

Gift cards differ from scrip gift certificates, in that the latter are usually sold as a paper document with an authorized signature by a restaurant, store, or other individual establishment as a voucher for a future service; there is no electronic authorization. A gift certificate may or may not have an expiration date and generally has no administrative fees.

Bank issued gift cards may be used in lieu of checks as a way to disburse rebate funds. Some retailers use the gift card system for refunds in lieu of cash thereby assuring that the customer will spend the funds at their store.

A charity gift card allows the gift giver to make a charitable donation and the gift recipient to choose a charity that will receive the donation.

Gift cards can also be country-specific, and can be used to access USA-specific programming and media when outside the United States.

Mobile and virtual gift cards

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An app store gift card display in a shop

Mobile gift cards are delivered to mobile phones via email or SMS, and phone apps allow users to carry only their cell phone.

Virtual gift cards are delivered via email to the recipient, the benefits being that they cannot be physically lost and that the consumer does not has to spend the additional time needed to buy a physical gift card in a brick and mortar store making it more convenient. Gift cards of this type can also be purchased quicker, which is especially attractive if a gifting occasion is on the horizon.

Other companies have introduced virtual gift cards that users redeem on their smartphones. As the merchant is not involved in the loop, it is considered a cash transfer rather than a traditional gift card.

Store credit

[edit]

Store credit often provided by retailers in the form of a gift card when customers return a product in lieu of a cash or credit card refund, or when merchandise cannot be exchanged.[14][15] The store credit amount is usually equal to the item's last sale price.[15] In e-commerce, the store credit is accessed through the retailer's website.[14]

In recent years, retailers have introduced buyback and trade-in programs in which store credit is issued to customers in exchange for used goods.[16][17] In 2022, a group of Italian fashion retailers introduced a scheme in which customers could return used clothes to receive store credit to buy new clothing.[17] The expected benefit to retailers was increased customer loyalty and upselling, as customers were likely to spend more than the credit's value.[17]

Gift card collecting

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Gift cards can have many different designs, including for, holidays, special occasions, sports teams, cartoons, and more. Some hardcore collectors collect different variations of each card, and or prefer where the pin number is not scratched off. Even more desirable are brand new unused gift cards even ones still attached to the retail backers. Most gift cards are plastic, some variances include clear plastic, shaped cards, and paperboard cards. Recently most Starbucks and Chipotle gift cards are now paperboard instead of plastic. A partial list of popular retailers with collectors who have released gift cards worldwide with many different designs and or variations include:[18][19]

According to the Guinness Book of World Records, the largest gift card collection in the world, as of 2021, belonged to Canadian-American brothers Aaron and David Miller of Scarsdale, New York. By 2013, the brothers had amassed an estimated 3,125 different cards.[20]

In addition, some online collecting websites have pages dedicated to gift card listings for collectors.

Pitfalls

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It has been argued that holiday giving destroys value due to mismatching gifts.[21] The most efficient way to keep value in gifting would be to give cash; however, giving cash in most cultures is not socially acceptable, except with children. Gift cards, to a degree, may overcome this problem, but have certain pitfalls. Some feel that the absence of the thought of selecting a specific gift makes a gift card a worse choice than a poorly executed but individual gift.[22] New products in the gift card industry are evolving to tackle this "impersonal" pitfall of gift cards; new services launched by some service providers allows for customization and personalization of gift cards.[23]

Gift cards have been criticized for the issuer's ability to set rules that are detrimental to the purchaser or card recipient. For example, gift cards may be subject to an expiry date, administrative fees, restrictions on use, and absence of adequate protection in case of fraud or loss.[3] Over time fees may nullify the value of a gift card. However, these issues have been addressed in recent years in some jurisdictions. In the United States, many jurisdictions limit or prohibit all fees and expiration dates for gift cards. Furthermore, because such policies can negatively impact sales, most merchants have adopted and even advertise a no fee, no expiration policy for their gift cards, whether or not state laws require it. In 2011, an estimated 2.5% of gift cards were subject to an expiration date and 2.7% to post-sale fees.[24]

A quarter of gift card recipients have still not spent the card a year after receiving it, according to a Consumer Reports survey, and a majority of people say they end up spending more than the value of the card once they get to the store.[25] On the other hand, consumers may try to use as much of a gift card as possible while avoiding spending money out of pocket, usually resulting in small values remaining on the card. Consumer laws in some places have addressed this. In Australia, a gift card can be exchanged for cash if there is a remaining amount that the business believes cannot be "conveniently used".[26]

In the event of the bankruptcy of the issuing retailer, the outstanding value on gift cards is considered unsecured debt, so the gift cards may become valueless.[25] If the company intends to continue trading, gift cards may be honoured even in bankruptcy.

Use in fraud

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Retailers and other businesses are increasingly about what can be done to prevent gift cards from being exploited by fraudsters. Gift card information can either be stolen from their rightful owners by fraudsters or they can be purchased with stolen credit card information. In recent years, cyber criminals have increased their efforts to take advantage of fraudulent gift cards, as they are simple to exploit with automated brute-force bot attacks.[27] The most common form of gift card fraud is the theft of card information for activated cards with an existing balance by attacking a retailer's systems which store gift card data. Once a gift card has been compromised, the fraudster will then check the balance through online customer portals before using the funds or reselling on the secondary gift card market.[28]

Digital scammers sometimes trick victims into buying gift cards, which are then stolen.[29][30] For the scammer, they have the advantage of being completely untraceable.[30]

In 2023, the Federal Bureau of Investigation warned the public about gift cards which appear to have a sticker placed over the barcode.[31] The United States Department of Homeland Security launched Project Red Hook due to the billions of dollars of gift card losses generated by Chinese organized crime.[32][33]

Redemption rate

[edit]
Main article: Breakage (accounting)

Not all gift cards are redeemed. The card may be lost, there may be time decay expiration and fees or complex rules of redemption, or the recipient may not be interested in the store that accepts the card or be under the false assumption that not using it will save money for the giver. It has been estimated that perhaps 10% of cards are not redeemed, amounting to a gain for retailers of about $8 billion in the United States in 2006.[7]

In 2012,[needs update] over $100 billion in gift cards were expected to be purchased in the United States, where over 20% of those gift cards expected to go unredeemed or unused. This has amassed a large opportunity in the secondary market, similar to the secondary ticket market in the early 2000s. Some companies have created a business in the secondary gift card market that allows consumers to sell their unused gift cards or to buy discounted gift cards for their favorite brands. This has helped their users recoup their share of some $55 million per day that goes unredeemed in the United States every year.[citation needed]

Regulations

[edit]

Canada

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All Canadian provinces have passed laws to ban expiry dates and fees collected on gift cards.[34] However, provincial gift card laws do not apply to sectors that are regulated under federal laws. For example, gift cards that resemble credit cards ( i.e. with American Express, MasterCard, or Visa branding) and phone cards are regulated by the federal government. Under the federal Prepaid Payment Products Regulations, effective 1 May 2014, federally regulated gift cards may only charge maintenance fees under certain conditions and may not set an expiry date for funds on those cards.[35]

United States

[edit]

In the past, there were no uniform standards concerning gift cards. This was set to change,[needs update] as an addendum to the Credit CARD Act of 2009 directs the federal government to create consumer-friendly standards pertaining to gift cards.[36] Most notably, the new regulations prohibit retailers from setting expiration dates unless they are at least five years after the card's date of issue or the date on which funds were last added to the card. In addition, retailers can no longer assess dormancy, inactivity, or service fees unless the card has been inactive for at least 12 months; if fees are added after that period, the details of such fees must be clearly disclosed on the card. Additionally, retailers are unable to levy more than one fee per month. The new provisions took effect on 22 August 2010.[37][needs update]

Open loop cards are governed by rules of the Comptroller of the Currency; however, oversight has been criticized.[3] Closed loop gift cards are subject to rules set by different state regulations, and issuing authorities vary widely in the rules they set for the consumer.[3] Moreover, rules can be changed by the issuer without notifying the consumer.[12][7]

See also

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References

[edit]
Revisions and contributorsEdit on WikipediaRead on Wikipedia

Gift card

View on Grokipedia
from Grokipedia
A gift card is a prepaid card, code, or digital device issued on a stored-value basis, entitling the recipient to purchase specified goods or services from the issuer or affiliated entities up to the loaded amount, functioning as a alternative redeemable primarily for personal, , or purposes. Originating in the United States with the first mass-marketed plastic versions launched by Blockbuster Video in 1994—building on earlier paper certificates from department stores—gift cards evolved from niche retail promotions into a dominant gifting mechanism, surpassing traditional presents in popularity by the early 2000s due to their flexibility and reduced risk of mismatched gifts. The global market has expanded rapidly, with U.S. revenues forecasted at $447.1 billion in and worldwide values projected to exceed $1.2 trillion in the same year, driven by integration and digital variants that enable instant delivery via or apps; physical cards remain common for in-store , while reloadable general-use prepaid cards offer broader utility akin to debit instruments. Despite their convenience, gift cards carry inherent risks and economic implications: issuers profit substantially from "breakage," the unredeemed balances (often 1-10% of total value) that forfeit to retailers rather than consumers, yielding billions in unspent revenue annually; federal regulations under the 2009 CARD Act mandate at least five-year expiration periods and restrict fees to preserve value, yet scams exploiting —such as thieves scraping codes or coercing purchases for —have led to millions in consumer losses, with the FTC documenting over $79 million in reported gift card-related by 2019 and ongoing vulnerabilities in retail displays amplifying .

History

Origins in Paper Certificates

The earliest precursors to contemporary gift cards were paper-based gift certificates, introduced by retailers in the late as a means to offer flexible store credit for merchandise purchases. One of the first documented instances occurred in , when the Marquette Trading Company in , began issuing such certificates, allowing recipients to select items independently and addressing common gifting challenges like mismatched sizes or preferences. These documents typically consisted of printed or handwritten vouchers specifying a monetary value redeemable solely at the issuing merchant, functioning as a non-refundable promise of equivalent goods rather than . By the early , paper certificates had evolved into standardized forms used by various retailers, particularly for seasonal promotions and employee incentives, though widespread adoption among major department stores solidified in . Retailers valued them for generating deferred sales and customer , as certificates encouraged return visits and often resulted in additional spending beyond the stated value due to recipients' tendency to supplement with personal funds. However, their paper format made them vulnerable to loss, damage, and rudimentary , limitations that persisted until technological advancements in printing exacerbated counterfeiting risks in later decades. Despite these drawbacks, paper certificates established the core principle of prepaid, recipient-directed retail value, laying the groundwork for subsequent innovations in stored-value instruments.

Emergence of Plastic and Stored-Value Cards

The transition from paper-based gift certificates to plastic stored-value cards addressed vulnerabilities such as counterfeiting, which became prevalent with the advent of affordable color copiers and printers in the early . Retailers sought durable alternatives that could securely hold prepaid value, leading to the development of plastic cards embedded with magnetic stripes for electronic balance storage and point-of-sale (POS) activation. In 1994, Blockbuster Entertainment introduced the first widely available plastic gift card, a multi-purpose stored-value instrument that remained valueless until activated at checkout, thereby minimizing fraud risks during distribution. This innovation marked a pivotal shift, as the card's magnetic stripe enabled merchants to load and track funds electronically rather than relying on manual voucher redemption. Neiman Marcus concurrently claimed to be the first retailer to offer such plastic gift cards for sale that year, though Blockbuster's model emphasized the stored-value mechanism to combat the era's forgery issues. By the mid-1990s, the technology proliferated, with magnetic stripe-equipped plastic cards becoming standard for closed-loop systems limited to specific retailers. These cards stored monetary value directly on the stripe, readable by POS terminals for deductions, which streamlined transactions and reduced administrative burdens compared to paper equivalents. Open-loop variants, usable across networks like Visa or , emerged around the same period, expanding versatility but introducing regulatory scrutiny over risks. Adoption accelerated due to the cards' durability, portability, and integration with existing retail infrastructure, setting the stage for gift cards to supplant traditional certificates by the early .

Shift to Digital and Mobile Formats

The emergence of digital gift cards occurred in the early 2000s, as retailers began offering electronic versions deliverable via email, marking an initial departure from physical formats. This format gained prominence in the late 2000s and throughout the 2010s, driven by the proliferation of smartphones and e-commerce platforms that enabled instant purchase and delivery. By the late 2000s, major retailers integrated digital options into mobile apps and email systems, facilitating broader accessibility without the logistical constraints of printed or plastic cards. Adoption accelerated exponentially in the early 2010s alongside rising smartphone penetration, which allowed consumers to store and redeem gift card values directly on devices. Mobile gift cards, often integrated with digital wallets and retailer apps, further streamlined usage by enabling barcode scanning or NFC-based redemption at points of sale. As of 2023, digital gift cards constituted 34% of the total market, reflecting a 7% year-over-year increase in sales volume. This segment has sustained rapid growth, with a reported 17.1% year-over-year adoption rate attributed to enhanced convenience and immediacy. A pivotal milestone arrived in the first half of 2024, when digital gift cards surpassed physical ones in market share for the first time, capturing 52% of sales amid a 17.1% surge from prior periods. This shift reflects broader retail trends toward digital payments, with approximately 58% of active mobile phone users expressing interest in device-based redemption for gift cards and related transactions. Projections indicate the digital gift card market will expand at a compound annual growth rate of 8% from 2023 to 2028, reaching $115.3 billion globally, fueled by reduced production costs, lower fraud risks through tokenized values, and seamless integration with online shopping ecosystems. Retailers benefit from higher redemption rates and breakage minimization, as digital formats eliminate loss or expiration barriers inherent in physical cards.

Types and Functionality

Physical Gift Cards

Physical gift cards are tangible prepaid stored-value instruments, typically issued by retailers or brands in the form of or paper cards preloaded with a fixed monetary amount for use as at affiliated locations. Unlike digital variants, they require physical possession and presentation during transactions, often scanned via or magnetic stripe at point-of-sale terminals. These cards emerged as an evolution from paper certificates, gaining prominence with the adoption of durable materials enabling and distribution. Construction of physical gift cards predominantly utilizes (PVC) plastic for durability, with thicknesses around 0.76 mm to resist bending or tearing, though sustainable alternatives like from renewable sources are increasingly available. Premium versions employ on a thin clear PVC laminate for enhanced visual appeal and longevity, while options may use or simple stock for short-term use. Customization includes full-color designs, foil stamping, or spot , often sized to standard dimensions for compatibility with wallets. Security measures on physical gift cards incorporate tamper-evident packaging, holographic elements, unique serial numbers, and protective coatings over PIN codes to deter such as card draining before purchase. Retailers recommend inspecting cards for signs of tampering, like damaged seals or altered PIN areas, and activating them only at trusted points of sale with real-time backend verification. Advanced features may include geolocation tracking for suspicious redemptions and RFID-blocking recommendations for storage to prevent unauthorized scanning. Activation occurs at the time of purchase, linking the card's to the loaded value via retailer systems, after which redemption involves presenting the card in-store for deduction of the purchase amount. Approximately 56% of physical gift cards are redeemed within six months of issuance, though risks of loss or can lead to unredeemed balances, contributing to industry breakage rates. Their tangible nature supports impulse gifting and in-person exchanges but introduces logistical challenges like shipping delays and vulnerability to physical damage.

Virtual and Mobile Gift Cards

Virtual gift cards, also known as e-gift or digital gift cards, are prepaid instruments delivered electronically via , text message, or app notifications, consisting of a unique alphanumeric code that represents stored monetary value redeemable at designated retailers or services. Unlike physical cards, they require no tangible medium, enabling instant issuance and delivery without production, shipping, or handling costs associated with plastic alternatives, making them suitable for last-minute gifting such as e-gift cards from major retailers like Amazon or Sephora or digital subscriptions to streaming services and educational platforms like MasterClass. Recipients activate the code during online checkout by entering it manually or, in physical stores, by presenting it for scanning, deducting the used amount from the balance while preserving any remainder for future transactions. Mobile gift cards build upon virtual formats by integrating directly into smartphone digital wallets, such as or , where they function as virtual passes with scannable barcodes or (NFC) capabilities for seamless in-store redemption. Users add the card via a provided link or code, storing it securely on the device for quick access, often with lock-screen notifications or automated reminders to encourage usage; for instance, apparel brands may issue them as promotional rewards, surfacing the balance prominently to drive repeat purchases. This integration supports contactless payments, reducing friction compared to manual code entry, though compatibility depends on the merchant's point-of-sale systems supporting wallet protocols. The distinction between virtual and mobile variants lies primarily in accessibility and usability: virtual cards emphasize code-based delivery suitable for broad digital channels, while mobile variants prioritize app-based storage for enhanced portability and security features like device encryption, minimizing risks of loss or unauthorized access inherent to emailed codes. Both formats have propelled market expansion, with digital gift cards—including virtual and mobile—growing from $493.12 billion in 2024 to a projected $581.38 billion in 2025 globally, driven by adoption and reduced operational overheads that lower issuer costs by up to 50% relative to physical cards. Adoption surged post-2020 due to accelerated digital payment shifts, with U.S. digital gift card volumes comprising over 20% of the $216.9 billion total gift card market in 2024.

Closed-Loop versus Open-Loop Distinctions

Closed-loop gift cards, also known as single-load or proprietary cards, are prepaid instruments issued by a specific retailer or a limited network of affiliated merchants, redeemable solely for goods or services from the issuer or its partners. These cards enhance by channeling spending back to the issuer, as recipients must shop within the designated , such as a card usable only at Starbucks locations or a Target card restricted to Target stores. Retailers benefit from greater control over the transaction process, including lower processing costs and on customer preferences, without reliance on external networks. Open-loop gift cards, conversely, operate on general-purpose payment networks such as Visa, , American Express, or Discover, enabling redemption at any merchant accepting those networks, akin to a . This broader usability provides recipients with flexibility, allowing purchases across diverse retailers, restaurants, or online platforms. Alternatives to Visa and Mastercard gift cards for online payments include American Express and Discover prepaid/gift cards (usable wherever those networks are accepted online) as well as merchant-specific closed-loop gift cards (e.g., Amazon, Walmart, Target, Apple, Google Play), which are redeemable on their respective websites or apps. This suits givers seeking versatility over specificity. However, open-loop cards typically involve higher issuance and transaction fees paid to network providers, and issuers have less direct influence over where funds are spent. The core distinctions between the two revolve around redemption flexibility, issuer control, and economic incentives: closed-loop systems prioritize captive spending to drive repeat visits and incremental sales—evidenced by Starbucks' 2022 reporting of billions in stored value from such cards boosting engagement—while open-loop systems emphasize convenience but dilute brand-specific retention. In the U.S. market, closed-loop cards commanded a 62.3% share in 2024, reflecting retailers' preference for proprietary programs amid rising e-commerce integration. Globally, closed-loop segments are projected to hold around 64% by 2035, fueled by anti-fraud features and loyalty program synergies. Semi-closed or hybrid variants exist, blending elements like usability at a retailer's partners, but remain less prevalent than pure forms.

Integration with Store Credit Systems

Retailers commonly integrate gift cards with store credit systems by issuing store credit in the form of physical or digital gift cards, enabling unified tracking, redemption, and balance management through point-of-sale (POS) and platforms. This approach treats store credit as a restricted stored-value instrument, often leveraging the same backend infrastructure as gift cards to simplify operations and reduce administrative overhead. In return and refund processes, integration facilitates converting cash-eligible refunds into store credit via gift card issuance, particularly for no-receipt returns or after the cash refund window closes, which helps retain customer spending within the retailer's ecosystem. POS systems from providers like Square and Lightspeed support this by allowing staff to generate gift card codes for store credit directly at checkout, with balances syncing across in-store, , and mobile channels to prevent discrepancies and enable redemption. While store credit differs from traditional gift cards in being non-transferable and tied to specific return transactions, retailers often use gift card platforms to implement it due to shared features like scanning for redemption and automated balance updates. extensions, such as those for 2, automate store credit issuance linked to (RMA) workflows, ensuring compatibility with POS data for consistent in-store application. This integration complies with U.S. regulations under the CARD Act of 2009, which mandates clear disclosure of any expiration policies—typically allowing dormancy fees after one year of inactivity but prohibiting immediate expirations for store-specific credits. Such systems enhance retailer control over liabilities, as unused store credit issued via gift cards contributes to breakage —estimated at 1-2% of total gift card annually across the industry—while encouraging repeat visits without the outflow of . For instance, platforms like Return Prime convert refunds to store credit to boost , reporting higher retention rates compared to refunds, though exact figures vary by policy implementation. Overall, this convergence streamlines prevention through centralized auditing and supports data analytics on redemption patterns to inform and marketing strategies.

Economic Dimensions

The global gift card market, encompassing the total value loaded onto physical, virtual, and mobile formats, reached approximately USD 1.10 trillion in 2024. This figure reflects the aggregate face value of cards issued by retailers, financial institutions, and digital platforms worldwide, driven primarily by seasonal gifting during holidays and integration with ecosystems. Alternative estimates place the 2024 market at USD 1.21 trillion, highlighting variability in methodologies across research firms but confirming a scale exceeding USD 1 trillion annually. Market growth has accelerated post-2020, with compound annual growth rates (CAGRs) ranging from 9% to 16% in recent projections. For instance, from 2024 to 2025, the market is forecasted to expand to USD 1.24 trillion, representing a year-over-year increase of about 13%. Over longer horizons, CAGRs of 12.5% to 14.2% are anticipated through 2032-2034, propelled by rising of digital gift cards, which comprised over 40% of issuance in mature markets by 2024 due to convenience and reduced production costs. Key drivers include penetration in emerging economies, partnerships between retailers and payment processors, and the normalization of non-cash gifting habits post-pandemic, though growth is tempered by economic pressures on . Projections indicate the market could surpass USD 3.8 trillion by 2034, with digital formats leading expansion amid ubiquity and blockchain-based secure issuance. Regional trends show and dominating with over 50% share in 2024, fueled by established retail networks, while exhibits the highest growth potential at CAGRs above 15%, attributed to and innovations in countries like and . These trajectories assume sustained retail recovery and minimal regulatory disruptions, though discrepancies in forecasts underscore the influence of definitional differences, such as inclusion of breakage revenue versus gross load value.

Redemption Dynamics and Breakage Profits

Gift card redemption typically occurs gradually over time, with industry data indicating that approximately 56-57% of cards are redeemed within the first six months of issuance. This pattern reflects consumer behavior where recipients prioritize high-value or preferred cards shortly after receipt, often during post-holiday shopping periods, while lower-value or less appealing cards linger unused. Digital gift cards redeem faster, averaging around 17 days compared to physical cards, due to ease of access via apps and online platforms. Redemption rates have declined post-pandemic, with average unused balances rising 30.5% from 2023 to 2024, signaling delayed or abandoned usage amid economic pressures and shifting spending habits. Breakage refers to the portion of gift card balances that remain perpetually unredeemed, which retailers recognize as under standards like ASC 606 once redemption becomes remote, typically estimated at 10-19% of total issued value based on historical patterns. This breakage generates pure profit for issuers, as funds are received upfront without corresponding until redemption, with U.S. consumers leaving an estimated $21 billion unspent across all cards as of 2023. Retailers like have capitalized significantly, reporting $1.77 billion in unredeemed balances in 2024—a 9% year-over-year increase—and $212 million in breakage for 2022 alone. Breakage rates vary by retailer and card type, often ranging from 2-4% of annual sales when recognized, but cumulative unredeemed liabilities can exceed billions industry-wide, enhancing margins without additional or inventory costs. The economic mechanics of breakage hinge on deferred liability accounting: upon sale, is deferred as a liability, with breakage accreted proportionally to redemptions to avoid overstatement. This model incentivizes gift card programs, as unredeemed funds provide interest-free capital for retailers, often yielding higher returns than traditional sales where costs are immediate. For instance, in , multiple large firms derived over $20 million each from breakage, underscoring its role in bolstering profitability amid competitive retail environments. However, estimates rely on predictive models of , which can introduce variability if redemption accelerates due to reminders or economic stimuli. Overall, breakage constitutes a structural advantage in the gift card , transforming potential consumer value into retailer equity with minimal regulatory constraints in most jurisdictions.

Influence on Retail Sales and Consumer Expenditure

Gift cards significantly augment retail sales by generating upfront revenue from their issuance, often during peak periods like holidays, while redemptions typically involve additional consumer spending beyond the card's face value. In the United States, gift card sales reached approximately $308 billion in 2024, reflecting a 45% increase over the prior four years and outpacing broader retail spending trends. During the 2023 holiday season, total gift card value sold rose 12.36% year-over-year, underscoring their role in driving seasonal revenue spikes for retailers. Empirical observations indicate that a substantial portion of redemptions—61% of consumers in one analysis—exceed the card's value, with recipients averaging $31.75 in extra expenditure, thereby converting deferred liabilities into immediate sales uplift. From a expenditure perspective, cards promote higher overall outlays through behavioral mechanisms such as reduced price sensitivity at redemption and the tendency to "top up" balances. Surveys reveal that 68% of recent redeemers spent more than their card's value in the preceding year, while two-thirds of shoppers consistently exceed the amount in general usage patterns. This overspending effect, documented across multiple datasets, stems from the psychological framing of cards as "free money," leading to less elastic demand and incremental purchases not otherwise made with equivalents. Retailers benefit from this as cards channel expenditure toward their stores, increasing basket sizes and foot traffic; for instance, studies of casual dining chains show targeted purchase shifts upon redemption. Economic analyses further note that recipients typically value gift cards at less than face value—estimated at a 10-20% discount—due to restricted redemption options and potential mismatches with preferences, resulting in deadweight loss that favors retailers by directing spending exclusively to their ecosystems alongside breakage profits. However, the net influence on aggregate expenditure remains modulated by factors like redemption rates and economic conditions. While gift cards facilitate spending in uncertain environments— with 81% of purchasing them in the past year amid pressures—unredeemed balances (breakage) effectively reduce realized expenditure without corresponding delivery, though this accrues as pure profit to issuers rather than outlay. In inflationary contexts, such as 2024, increasingly allocated gift cards toward essentials, sustaining retail volumes but potentially substituting for direct spending elsewhere. These dynamics highlight gift cards' role in stabilizing retailer flows while subtly elevating per-transaction expenditure, supported by consistent empirical patterns across retail sectors.

Usage Patterns

Common Gifting and Redemption Practices

Gift cards are frequently selected as presents for birthdays, which account for 77% of gift card purchases, followed by holidays such as , , or at 63%. Other common gifting events include , , anniversaries, graduations, and baby showers, where the flexibility of allowing recipients to choose their preferred items or experiences proves advantageous. In the United States, 64% of consumers purchase gift cards specifically as holiday gifts, with 72% of those buyers preferring them to enable recipient choice over predefined items. This preference stems from their convenience, cited by 50% of consumers as a primary reason for selection in 2023. In 2026, legitimate methods for acquiring gift cards include earning them through rewards platforms, purchasing from official sources, and buying discounted cards from reputable marketplaces. Consumers can earn gift cards on platforms such as Swagbucks (surveys, games, shopping), Fetch Rewards (scan receipts), InboxDollars (surveys, videos), Branded Surveys, Rakuten (cashback), and Ibotta (receipts/shopping), where points or rewards are redeemable for gift cards. Gift cards can also be purchased directly from official sites like Amazon, PayPal Digital Gifts, or Gyft, or acquired at discounts via sites such as GiftCardGranny. A key element of gift card gifting is the inclusion of personalized messages, which add a thoughtful and personal touch that enhances the perceived value and emotional impact of the gift. Retailers commonly support custom messages, particularly for digital formats, as part of broader trends toward hyper-personalization in gifting. Thoughtful messages are typically tailored to the occasion and relationship, often incorporating the recipient's name, a shared memory, or a positive wish. Examples of creative gift card messages include:
  • Birthday: "Happy birthday to someone who knows me better than anyone and still sticks around! Hope this gift makes your day extra special!"
  • General/Thoughtful: "Here’s a little something to brighten your day, just like you brighten mine."
  • Romantic: "Every moment with you feels like a gift, and today I wanted to return the feeling."
  • Appreciation: "You deserve this break after taking care of me for so long."
  • Humorous: "Life is short - buy the shoes!" (for fashion lovers)
  • Friendly: "Sending this your way because you deserve a smile today."
  • Dining-specific: "Tonight’s on me. Happy birthday."
  • Encouraging: "Treat yourself to that book you’ve been eyeing - you deserve it!"
Tips for effective messages emphasize keeping them short, sincere, and personalized. Gifting practices often involve physical cards handed directly or mailed, while digital variants are emailed or shared via mobile apps for immediate delivery, particularly for last-minute or remote occasions. Recipients typically redeem gift cards at point-of-sale terminals in physical stores by scanning barcodes or magnetic stripes, or online by entering unique codes during checkout on the retailer's website or app (e.g., entering the code on Amazon during checkout or adding to the Starbucks app for mobile ordering and in-store use), with balances preserved for future partial uses. Over 90% of redeemed gift cards are activated within one month of receipt, reflecting prompt usage aligned with gifting intents like immediate holiday or birthday spending. Redemption rates average around 90%, though approximately 10% remain unredeemed, contributing to retailer . Practices emphasize ease, with many programs integrating with apps for seamless tracking and notifications of balances, encouraging full utilization. During peak seasons, such as holidays, redemption surges, often exceeding initial values through additional .

Emergence of Gift Card Collecting

Gift card collecting emerged as a niche in the early 2000s, coinciding with the and distribution of physical gift cards following their invention in 1994 by retailers like Blockbuster and . Initially driven by enthusiasts appreciating the cards' varied designs, branding, and materials—often from defunct stores or limited-edition promotions—the practice involved acquiring unused, zero-balance, or expired cards as memorabilia rather than for monetary value. Early interest was documented in online forums as far back as 2008, where collectors shared discoveries of dedicated websites and swapped cards for completeness in sets by retailer, country, or theme. The hobby gained formal recognition in the mid-2010s through entries, highlighting its growth from solitary pursuits to organized collecting. In 2014, brothers Aaron and David Miller from , established a record with a collection exceeding 20,000 unique gift cards sourced globally, emphasizing diversity in issuers and aesthetics over activation status. Subsequent attempts, such as Ben Hess's 2016 effort to surpass the mark with zero-value cards, underscored a focus on verifiable uniqueness and condition, often verified through serial numbers or holograms. Online communities facilitated the hobby's expansion, with platforms like Colnect hosting dedicated forums for trading and cataloging cards by the , attracting participants interested in historical retail ephemera. Collectors prioritize rarity, such as cards from obsolete chains or international variants, with one documented assemblage reaching 40,808 distinct items from 72 countries by 2019. Unlike trading card hobbies tied to speculative value, card collecting remains low-stakes, centered on preservation and personal curation amid the shift toward digital formats that reduced physical availability post-.

Advantages

Retailer Benefits from Gift Card Programs

Gift card programs enable retailers to secure upfront cash inflows without immediate fulfillment obligations, improving and allowing funds to be invested in or operations prior to redemption. Upon sale, retailers receive full payment, which contrasts with traditional sales by deferring under standards like ASC 606 until redemption or estimated breakage, yet providing immediate capital. This mechanism has contributed to U.S. gift card sales reaching approximately $308 billion in 2024, representing a 45% increase over the prior four years and underscoring their role in bolstering retailer cash positions. Retailers benefit from incremental sales upon redemption, as recipients frequently exceed the card's in spending, driven by the psychological commitment of pre-paid funds that encourages additional purchases to utilize balances. Empirical analysis of a major U.S. department store's promotions revealed that gift cards elevate purchase frequency and size, with promotional incentives amplifying these effects through and perceived value. Industry data indicates that 37% of consumers spend beyond the card amount, yielding extra revenue per transaction, while gift cards can constitute 1-4% of total revenue for small businesses through such uplift. Breakage, or unredeemed balances, generates pure profit for retailers after applicable escheatment periods, with historical rates estimated at 10-19% of issued value based on patterns across issuers. For instance, reported $1.77 billion in unredeemed balances in fiscal 2023, reflecting a 9% year-over-year rise and direct contribution to earnings once recognized proportionally with redemptions. for breakage involves estimating non-redemption probabilities from historical data, enabling revenue accrual without corresponding costs, though rates vary by retailer and must comply with state unclaimed property laws to avoid underestimation risks. Strategically, gift cards facilitate customer acquisition by serving as gifting vehicles that draw non-customers into stores or digital platforms, converting recipients into repeat buyers via introductory exposure. Programs integrated with promotions or partnerships expand reach, with evidence showing they enhance brand visibility and entry into ecosystems, as recipients often redeem in ways that prompt further engagement. This acquisition dynamic, combined with retention from redemption habits, positions gift cards as a low-cost tool for expanding customer bases amid competitive retail landscapes.

Consumer Conveniences and Economic Efficiencies

Gift cards afford recipients greater flexibility in selecting merchandise or services aligned with their preferences, mitigating the inefficiencies inherent in traditional in-kind gifts where donor-recipient preference mismatches often result in suboptimal utility or resale efforts. This choice-based mechanism reduces the associated with gifting, as empirical analyses indicate that recipients derive higher satisfaction from the to allocate value toward personally valued items rather than predefined objects. For givers, the standardized denominations and wide availability simplify without necessitating intimate knowledge of the recipient's tastes, streamlining the gifting process across occasions such as holidays or employee incentives. Digital variants further enhance convenience through instantaneous electronic delivery, enabling remote or time-sensitive gifting without physical handling or shipping delays, a feature increasingly utilized amid economic pressures where shoppers prioritize versatile, low-effort options. In 2026, consumers have several legitimate avenues to acquire gift cards online. They can earn them without direct monetary outlay by accumulating points or rewards through platforms that offer gift cards as redemption options for activities such as surveys, games, shopping cashback, video watching, or receipt scanning. Prominent examples include Swagbucks (surveys, games, shopping), Fetch Rewards (receipt scanning), InboxDollars (surveys, videos), Branded Surveys, Rakuten (cashback), and Ibotta (receipts/shopping). Consumers may also purchase gift cards directly from official sources, including retailer websites such as Amazon or specialized digital gift platforms like PayPal Digital Gifts and Gyft, or acquire discounted gift cards through marketplaces such as GiftCardGranny. Redemption of digital gift cards typically involves entering the code during online checkout on the retailer's website or mobile app (for example, Amazon or Starbucks) or presenting it in-store where applicable. From an economic standpoint, gift cards function as pre-committed spending instruments that assist consumers in managing budgets by capping expenditure at the loaded value, thereby promoting disciplined allocation during inflationary periods or personal financial constraints. Surveys reflect this utility, with approximately 90% of consumers favoring gift cards over other rewards due to their perceived flexibility and control over spending decisions. Such instruments also minimize transaction frictions compared to cash equivalents, as recipients avoid the risks of loss or theft while benefiting from retailer-specific incentives that amplify effective purchasing power without additional outlay.

Risks and Criticisms

Prevalence of Fraud and Scam Exploitation

Gift card fraud and scams represent a significant in the payments , with U.S. consumers reporting $217 million in losses to gift card-related schemes in 2023, contributing to the Federal Trade Commission's (FTC) record $10 billion in total scam losses that year. This figure marked an increase from $148 million in 2021, reflecting a rising trend driven by the cards' ease of use and irreversibility. Preliminary data for 2024 indicate further escalation, with estimated losses reaching $250 million, as scammers exploit the anonymity and rapid drainability of balances. Reports to the FTC surged, with nearly 40,000 consumers citing gift cards as a scam payment method in late 2021 alone, and median losses per victim rising from $700 in 2018 to $1,000 by mid-2021. Scammers frequently impersonate trusted entities such as agencies, tech support, or members in distress to coerce victims into purchasing and sharing gift card codes via phone, email, or text. Another common tactic involves offers to purchase Apple products at discounted prices from fake sales platforms, social media, or unknown individuals, demanding payment via Apple gift cards, after which the devices are never delivered. For instance, fraudsters posing as IRS officials or Amazon representatives demand immediate payment in gift cards to resolve fabricated issues, with urgency preventing verification; victims reveal PINs or claim codes, allowing instant balance depletion. emergency variants involve spoofed calls claiming a relative's or accident, requesting funds wired through cards like or , which are then resold on secondary markets. These social engineering tactics exploit trust, with the FTC noting that high-value losses—over $5,000—rose from 8% of reports in 2018 to 14% by 2021. Physical and digital tampering amplifies exploitation, as criminals remove cards from retail displays, record serial numbers and PINs, reseal , and return them for legitimate purchase by unsuspecting buyers whose balances are later drained online. Card draining at point-of-sale terminals or via hacked retailer databases enables unauthorized redemptions, while stolen cards fund illicit gift card buys for laundering. U.S. Immigration and Customs Enforcement reported in 2025 that such methods, including victim-assisted fraud where individuals are tricked into loading cards, have proliferated amid growth, with fraudsters favoring brands like Apple and Amazon for their liquidity on black markets. Better Business Bureau studies confirm heightened reports in 2023 over 2022, underscoring retailers' innovations like tamper-evident as partial mitigations amid persistent vulnerabilities. To further combat fraud, consumers should immediately check the purchase receipt for a line item confirming the gift card's activation or load amount, verifying proper processing and preventing losses from activation failures or cashier errors. Many retailers also prohibit using gift cards to purchase additional gift cards or combining balances from multiple cards. For instance, Walmart does not allow gift cards to be used for buying other gift cards, and Amazon restricts Amazon.com balances from purchasing gift cards. These policies, often linked to security measures, fraud prevention, and system limitations, help limit the conversion of potentially illicit funds into more liquid forms. Consumers should never share gift card numbers or PIN codes publicly or with untrusted parties, as this allows scammers to redeem the balance immediately.

Issues with Fees, Expiration, and Non-Redemption

Gift cards are subject to various fees that can erode their balance without consumer activity. Activation fees, typically $2 to $6, are often deducted at purchase to cover issuance costs. Dormancy or inactivity fees, which apply for non-use, are restricted under the U.S. to no earlier than one year after activation, with clear disclosure required on the card. Service or maintenance fees may also apply monthly after the dormancy period, potentially reducing balances to zero if unchecked. Consumer complaints to the highlight instances of premature or undisclosed fee impositions, such as a $4 dormancy charge applied before the one-year threshold. These fees disproportionately affect infrequent users, transforming intended gifts into diminished assets. Expiration provisions further complicate value retention, as balances become inaccessible after a set period. prohibits expiration before five years from for most general-use prepaid cards, aiming to prevent rapid . Store-specific or closed-loop cards may have varying state rules, but non-disclosure of dates has led to unexpected losses, with some retailers historically applying short terms before regulatory crackdowns. In practice, expiration contributes to breakage when combined with forgetfulness or logistical barriers, as evidenced by cases where vouchers lapsed after failed redemption attempts within the validity window. Non-redemption, known as breakage, accounts for significant unredeemed balances, yielding profits for issuers while imposing losses on holders. As of 2023, held approximately $21 billion in unused gift card value, with about 6% of cards never activated. Surveys indicate 43% of U.S. adults possess at least one unused card, averaging $244 per person, often due to misplacement, partial spending inertia, or preference mismatches. Breakage rates vary by issuer; for instance, reported $1.77 billion in unredeemed balances in 2023, up 9% year-over-year. Unlike accounts, gift card funds are typically exempt from escheatment to states as unclaimed property, allowing retailers to retain the value indefinitely. This dynamic has drawn criticism for incentivizing low redemption through opaque terms or high minimum spends, though issuers argue it offsets and operational costs. To mitigate breakage from small remaining balances, particularly on open-loop prepaid gift cards such as Visa-branded cards, consumers can employ several redemption strategies. A reliable in-store method involves making a purchase exceeding the remaining balance and requesting split payment; the card is charged its full remaining amount first, with any difference paid using cash, debit, or another payment method. This approach works at many retailers, including grocery stores, Walmart, drugstores, and gas stations (paying inside rather than at the pump). Online options include purchasing an Amazon e-gift card for the exact remaining amount, if it meets any applicable minimum (often $5 or more). Alternatively, the card can be added to a PayPal account to facilitate use for payments where PayPal is accepted or to transfer the balance, though fees may apply. Prepaid Visa gift cards generally cannot be cashed out directly at banks or ATMs.

Debates on Economic Waste and Inefficiency

Gift card programs generate significant breakage, defined as the portion of issued cards that remains unredeemed, allowing retailers to recognize the unspent balances as revenue after applicable dormancy periods. Estimates of breakage rates vary, with industry analyses indicating typical figures of 2-4% for many programs, though some reports cite ranges up to 10-19% depending on card type and retailer. In the United States, collective unspent gift card balances reached approximately $21 billion as of early 2023, representing funds transferred from consumers to retailers without corresponding goods or services delivered. Economists debate whether this breakage constitutes economic waste or inefficiency, often framing it within the broader context of in gifting. Proponents of inefficiency argue that non-redemption creates a pure transfer of value from gift recipients (who forfeit ) to retailers (who retain funds without fulfilling obligations), exacerbating beyond that of gifts; one study estimated this loss at over 14% of gift card value, nearly double the average for traditional presents. Furthermore, even redeemed gift cards are inefficient because recipients value them less than face value due to restricted redemption options and preference mismatches with available offerings, further amplifying deadweight loss relative to cash equivalents and favoring retailers by capturing surplus value over consumer preferences. This arises causally from recipient , loss or of cards, or deliberate non-use due to category restrictions on closed-loop cards, leading to suboptimal where the original purchaser's expenditure fails to maximize recipient welfare. Critics of gift cards, including figures like Joel Waldfogel, extend this to contend that even redeemed cards impose mismatch costs if the recipient would prefer alternatives unavailable within the issuer's offerings, rendering the mechanism less efficient than direct transfers. Counterarguments emphasize that gift cards mitigate rather than amplify inefficiency compared to physical gifts, which suffer higher from valuation mismatches (often 10-20% or more), by allowing recipients greater choice within predefined options. Breakage, in this view, functions as an implicit to retailers, providing interest-free float upon issuance—enhancing and enabling reinvestment—while the overall system incentivizes spending, as evidenced by higher redemption-driven purchases than equivalent equivalents in some empirical observations. Retailers like reported $1.77 billion in unredeemed balances in 2024, yielding breakage revenue that bolsters profitability without eroding consumer trust, given high overall redemption rates (around 94% nationally). From a causal standpoint, this retained value circulates back into the economy via retailer operations, potentially offsetting any localized waste, though skeptics note it distorts incentives by rewarding non-delivery of value. These debates highlight tensions between gifting's social signaling benefits—which may justify some inefficiency for relational gains—and pure , where unredeemed funds represent forgone without compensatory output. Empirical data underscores variability: while aggregate breakage generates billions in retailer (e.g., select firms netting over $20 million annually in 2017), it also prompts losses averaging $175 per person in unused balances as of 2022. Regulatory constraints on expiration and fees in jurisdictions like the U.S. aim to curb extreme waste, yet persistent non-redemption suggests inherent frictions in deferred consumption mechanisms.

Regulatory Landscape

United States Federal and State Rules

In the , federal regulation of gift cards primarily stems from the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), which took effect on August 20, 2010, and applies to gift certificates, store gift cards, and general-use prepaid cards. This law prohibits issuers from imposing expiration dates on such products for less than five years from the date of issuance or activation, whichever is later, ensuring funds remain accessible for that minimum period. Exceptions include loyalty, award, or promotional incentive cards with nominal value; cards redeemable solely for admission to events or related merchandise; and certain telecommunications or technology cards. The CARD Act also restricts dormancy, inactivity, or service fees, permitting them only after at least 12 months of inactivity and only if the fee does not reduce the balance below the original issued amount (or last reloaded amount) without prior 12-month inactivity. Issuers must disclose all such fees clearly and conspicuously on the card, certificate, or accompanying packaging, including the amount, conditions for imposition, and a or for balance inquiries. No fees may be charged for card replacement or balance information provision. The (FTC) enforces these provisions under the Consumer Financial Protection Bureau's oversight for certain aspects, while emphasizing consumer education on avoiding gift card scams, such as demands for payment via gift card codes. State laws supplement federal requirements, with all 50 states and the District of Columbia having enacted statutes governing gift cards, often aligning with or exceeding CARD Act standards to address fees, disclosures, and escheatment of unused balances. For instance, states like prohibit dormancy fees entirely on gift cards and require escheatment of abandoned funds to the state after three years of inactivity. New York bans expiration dates outright for most gift cards, while mandates clear fee disclosures and limits inactivity fees to after one year. Approximately 40 states restrict or ban inactivity fees beyond federal limits, and many require prominent disclosure of terms on or receipts. Escheatment rules vary, with unused balances typically reverting to state unclaimed property funds after 1–5 years of , depending on , to prevent permanent forfeiture to issuers. These state frameworks aim to mitigate "breakage"—the non-redemption of balances—while provides a uniform baseline.

Canadian Provincial Frameworks

In Canada, gift card regulations fall under provincial , with no overarching federal specifically governing expiry dates, fees, or redemption for most retail gift cards. Provinces generally prohibit expiry dates on standard gift cards to prevent value erosion, though exceptions apply to promotional, charitable, or closed-loop cards tied to specific services like . Fees such as dormancy or inactivity charges are restricted or banned in most s to ensure full redeemability, but requirements for balance inquiries and receipts vary. Ontario's Consumer Protection Act, amended effective March 14, 2014, bans expiry dates on most retail gift cards, allowing redemption of full value indefinitely unless the card is promotional or for a specific event. Further amendments under the 2023 Consumer Protection Act clarify that electronic gift cards also cannot expire and prohibit non-disclosure fees exceeding the card's terms, with suppliers required to provide balance checks upon request. Replacement fees for lost cards are permitted but capped. In , the Business Practices and Consumer Protection Act, updated with regulations effective November 1, 2008, defines "prepaid purchase cards" and prohibits expiry dates and user fees for most gift cards, ensuring validity until fully redeemed. Exceptions include cards for unlimited services like transit passes; issuers must disclose any limited redemption periods at purchase, and balance information must be accessible without charge. Alberta's rules under the Fair Trading Act stipulate no expiry dates or fees that diminish gift card value over time for cards purchased in the province, including those from out-of-province retailers if redeemed locally. Suppliers must honor full value and provide proof of purchase receipts. Quebec's Consumer Protection Act, amended June 30, 2010, forbids expiry dates on prepaid cards redeemable for specific goods or services, treating non-compliant cards as having no expiry. This applies to merchant-issued cards but excludes free promotional ones or those from loyalty programs; merchants must allow partial redemptions without forcing full use in one transaction. Other provinces like mirror these protections, with regulations under the Consumer Protection Act deeming impermissible expiry dates void and requiring redeemability as if undated. , , and similarly restrict expirations and fees, though enforcement and disclosure rules differ slightly, emphasizing consumer access to balances and prohibiting value-reducing charges. These frameworks aim to mitigate non-redemption losses estimated at billions annually across , prioritizing consumer retention of purchased value over retailer breakage benefits.

Variations in International Jurisdictions

In the , gift card regulations lack harmonization at the supranational level, resulting in diverse rules across member states primarily enforced through national implementations of unfair commercial practices directives. Validity periods for gift vouchers vary significantly; for example, mandates a minimum expiration of five years from issuance to protect consumers from premature forfeiture. Other member states, such as , impose a three-year minimum validity starting from the end of the year in which the gift card was purchased or issued (e.g., purchased in 2024 valid until December 31, 2027), while countries like may allow shorter periods if transparently disclosed, though subject to scrutiny for fairness. Fees, including dormancy charges, are generally restricted if they erode the card's value without clear justification, with some jurisdictions prohibiting post-purchase fees altogether to prevent exploitative practices. Post-Brexit, the operates without statutory minimum expiration dates for gift cards, permitting issuers to set terms as short as desired provided they are prominently disclosed at purchase and comply with broader consumer rights under the , which deems hidden or unreasonable terms unenforceable. Refunds for unused balances are not mandated unless the card is defective, though voluntary policies are common among retailers to mitigate breakage risks. Inactivity fees remain permissible if explicitly stated, contrasting with stricter approaches in certain states, but must not render the product illusory under unfair terms assessments. Australia's Australian Consumer Law, amended in 2019, requires gift cards issued on or after November 1, 2019, to feature a minimum three-year validity period from the later of issuance or last use, aiming to reduce non-redemption rates estimated at 10-20% prior to reform. Activation and purchase fees are allowed if reasonable and disclosed upfront, but post-activation dormancy fees are banned to preserve consumer value. Refunds for low balances (typically under AUD 10) are not automatically required, though some states like encourage voluntary redemption policies. In other jurisdictions, such as , gift cards often carry a one-year expiration under voluntary industry codes, though varies and lacks federal mandates comparable to Western counterparts, leading to higher forfeiture risks. Brazil's Consumer Defense Code treats gift cards as prepaid credits without fixed expiration but prohibits abusive fees, requiring full redeemability unless intervenes. These divergences reflect differing priorities: in developed markets versus market flexibility in emerging economies, with global issuers adapting through region-specific terms to navigate VAT implications and cross-border usability constraints.

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