Who Get's My Money After Gift Card Expiration?

Did you get a gift card for Christmas? Since it was given to you, you probably think the money should be spent by you. However, if you wait too long to spend that gift card, it could end up in the state's unclaimed-property account.

Why? Well, even though you might not think you've abandoned your gift card, if you don't use it after a certain amount of years it might be subject to laws that allow the money left on that card to revert, or escheat, to your state's piggy bank.

So, when does the gift card money become the state's money? That depends on your state's escheat laws.
There are basically three models of escheat laws.

1. No expiration or escheat model.

This is a very consumer-friendly model used in several states including California, Washington and Massachusetts. This model never gives up the money to the state. The gift card is good from now until eternity. In this model, there is a reserve fund specifically for redemptions set up by the retailer. By setting up this reserve fund, the retailer recognizes that the consumer can eventually redeem the gift card for merchandise. Retailers in these states are not required to have the money escheat to the state.

2. 60/40 model.

This is a more traditional model stating that gift certificates can come with expiration dates and when they do expire (usually between three and five years) retailers are responsible for having 60 percent of the value of the card escheat to the state. The retailers are allowed to keep the other 40 percent. The state acknowledges that retailers have costs that come with gift cards and allows them to keep a portion of the leftover money. Indiana and Iowa use this law.

3. No gift-card expiration dates, escheat laws apply.

This model is somewhat confusing since the states involved, such as Connecticut, have eliminated expiration dates on gift card and certificates. However, even though consumers will not find expiration dates on their gift cards, they are expected to use their gift cards within three years. Otherwise the state views the gift card as abandoned and the money escheats to the state. However, if a customer comes in after three years and obtains merchandise from the store using their unexpired gift card, the retailers can apply to get the money back from the state.

According to George Delta, counsel to the Incentive Marketing Association, a trade organization of businesses in the incentive industry, "States require businesses to give them some type of periodic report of the amount of unclaimed property they are holding. This allows the state to monitor this potential source of income."

Dan Horne, professor of marketing at Providence College, says consumers ultimately benefit from state escheat laws because the unused money that is not claimed goes into the state Treasury.

With 50 states, there is no easy, uniform answer to questions of escheat. If you are wondering about how your state handles gift cards, the Incentive Gift Card Council offers a link to check your state's escheat laws.

By Kristin Arnold


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lonnas said...

i got a gift card from the phone company (visa Card) and didn't realize it expires in 2 mos. until I went to use it. In that case, Did the phone co buy the card like you or me would? so does the bank get the money? And if the state does gets it, how does the State know?