CreditCards.com's gift card survey showed that most gift cards issued by major retail chains do not expire. But some do. What happens to that unclaimed money is increasingly the subject of a tug of war between retailers and states, many of which have passed laws forcing retailers to turn the money over.
"There is an increasing chess game between issuers of these cards trying to find ways to reduce abandoned property exposure and states trying to increase ways to get their hands on what they view as legitimate abandoned property," says attorney Duncan Douglass of Alston & Bird, LLP in Atlanta, who specializes in gift cards and the state laws that apply to them. Catherine Fox-Simpson, a partner in the retail and consumer product practice at consulting firm BDO Seidman, LLP, is more blunt. "I expect a showdown," she says. "It is a matter of time."
As of November 2007, according to the National Conference of State Legislatures Web site, more than 30 states have unclaimed property laws that apply to unused gift card balances. In Michigan and New York, unused balances go to the state (escheat). In Texas and Illinois gift card balances are reverted to the state with certain conditions, while in Florida open-loop, network-branded gift card balances go to the state when unused. People who bought cards in those states may try to initiate unclaimed property claims, usually through the state’s treasurer or similar post. The National Association of Unclaimed Property Administrators’ Web site can link you to the appropriate office in every state.
A minority of states, including the largest, California, do not presently make any effort to reclaim gift card money into state coffers.
There is a third party in this competition over unspent gift card money: The consumer who paid for it in the first place.
How can these consumers make sure that neither the retailer nor the state gets to keep their money? Experts and states recommend the following steps:
When buying or receiving a gift card, read it carefully. In some cases, the retailer may not make it entirely clear if or how the gift card expires. "We encourage people to read the fine print regardless of what the merchandiser tells them," says Elizabeth Kupchinsky, spokeswoman for the Pennsylvania Treasury Department.
Hold onto the physical card itself and any receipts. Very often, it is unclear to whom the expired gift cards funds belong. "The difficulty in gift cards is that there is no name attached at the point of sale unlike, say, having a deposit for your utility service," says Rochelle Stewart, bureau chief for Citizen Services at the Montana Department of Revenue. Having the card and receipt in your possession can help.
Learn how gift card expirations are treated in your state, because the issuer may be prohibited from imposing an expiration date. In states with such laws, funds on expired gift cards no longer have to be turned over as unclaimed property.
If the state permits expiration and the date is past, talk to the retailer first. "We encourage people to go to the business and say 'Will you honor this?'" says Kupchinsky. Even if they won't, some card issuers may allow the gift card funds to be transferred to a new card.
If the retailer has already turned over the money, look to the state for help. Every state maintains an online database of unclaimed property. Additionally, a call to the Department of Revenue, state Treasury Department or other government branch in charge of unclaimed property could help.
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