Part 2-The Bottom Line

The following excerpts are taken from the Journal Of Accountancy, December 2007.
1…gift card ‘breakage’, or the portion of gift card balances that consumers fail to redeem for merchandise, can boost a retailer’s short-term cash flows. In the long term, gift card breakage can enhance the bottom line of the retailer – or state treasuries…
A…interviews with the directors of unclaimed property in several states suggest that the amounts escheated from gift cards are substantial…
2…the continued growth in the sale of gift cards has made breakage no longer just a byproduct of gift cards, but a potentially material contributor to profit in its own right…
3…the fundamental question for society to answer is, “Who better holds the interests of the consumer with regard to prepaid, but unclaimed, gift card balances?”
Let’s take these one at a time:
1 and 1A. Money we pay for the purchase of gift cards increases retailers’ short-term cash flows, enhances their long-term bottom lines, and/or increases the states’ treasuries! I have but one question for this, WHY? If I pay for something is it not mine regardless of if or how I use it? Do I have to return the unfinished portion of a meal simply because I am full? That’s completely absurd.

2. So, am I to understand that gift cards are sold for a dual purpose? First, to be used by the consumer. Second, to hopefully recapture the unused funds for no service or product.
I completely understand that it costs money to manage these accounts but not to the tune of 10% of the card’s value!
Also, when given a longer timeframe to complete a task, redeeming a gift card included, we are less likely to actually complete it and conversely, when given a smaller window we are much more likely to complete the task. This makes one think, “Who’s best interest is in mind when removing expiration dates from gift cards? If it is in the consumer’s best interest then the breakage should NOT fall under escheat laws and revert to the states’ treasuries. If it is in the states’ best interests then keep the new CARD Act in place and mask it as a consumer friendly law!

3. This question is great! Who better than me has my best interests in mind? Does anyone really have a more genuine reason for keeping my best interests ahead of any other than me? NO!
Let’s be real and upfront for once, OUR best interests have not been at the forefront of law since the writing of the Declaration Of Independence. We the people have our best interests in mind, we are not masquerading the truth nor are we blurring conceptions of reality, we would like to keep, or more appropriately REGAIN, some small amount of control over our hard earned money!

Darren Cannao
President, Matter Of Change
Darren@MatterOfChange.com