Gift card guide: How to maximize your money and avoid pitfalls when buying Starbucks, Target and other gift cards
Gift cards on display at Holiday Farms supermarket in Woodbury. Credit: Kendall Rodriguez
It's gift card season.
Over the next five weeks, many will eat a slice of turkey, wonder what qualifies as an ugly sweater and exchange gift cards.
Americans plan to spend more than 40% of their holiday budget on gift cards, according to a survey from Blackhawk Network, which provides gift cards, rewards and payment services. Gift cards are also a standard part of holiday festivities on Long Island, whether they’re welcome or not.
Raheeb Asif, 20, of Farmingdale, says he tends to receive products as presents, but would prefer gift cards, particularly to big box stores. They’re quite easy to use, he said.
And when you have a gift card to spend, “you’re more inclined to splurge a little bit,” said Asif, a college student.
Jasmine Lopez, 25, of Carle Place, expects to get gift cards, even though she’s not a big fan of them. As a retail store manager, Lopez said she often has customers struggle to redeem the cards, many times because scammers seem to have accessed card funds.
“Is it convenient?” she said. “Something’s always up.”
Despite stocking up on Starbucks cards in years past, Jane Kampton, 69, and Paul Bender, 71, a married couple from Long Beach, don’t envision giving many gift cards this year.
Bender, a retired dentist, once handed them out to patients and those who referred clients to his practice.
“I used to buy Starbucks cards 20, 30 at a time,” he said.
Kampton, who used to work near a Starbucks in New York City, finds it harder to remember to use gift cards now that she is retired.
“It expires, or I use part of it, and it has a $4.78 balance and then that never gets spent,” she said.
A new state law takes the pressure off New Yorkers who lose track of gift cards. Any gift cards or certificates issued from Dec. 10, 2022, on can’t expire within nine years. The measure also prohibits brands from hitting more leisurely shoppers with inactivity fees.
Some in the region are skirting the law, consumers say. John Leonard, of North Bellmore, said his wife received a $200 gift certificate to a restaurant when she retired in spring 2022. She had to pay out of pocket when getting takeout this August because the venue said the gift certificate was only good for one year, Leonard said.
“There’s a lack of education on this whole subject,” he said.
Here’s a look at what else consumers should know about the booming gift card industry:
Big.
Gift cards consistently top Americans' wish lists because they let people pick out what they want without the hassle of exchanging an unwanted present or returning it for store credit, according to Jordan Hirschfield, director of prepaid advisory services at Javelin Strategy & Research, which consults clients on financial services. Recipients slightly prefer "open loop" cards — those that are widely redeemable and carried by major payment networks like Visa or Mastercard, according to Javelin surveys. But gift-givers favor "closed loop" cards — those restricted to one restaurant or brand — because they view it as a more personal present, he said.
"Gift cards are the number one requested item," Hirschfield said. "The reason is: it's choice. I get to buy what I want."
The closed loop market in the U.S. is expected to hit $192 billion in 2023, and its open loop counterpart is estimated to reach $34 billion, according to Javelin's research, which includes gift cards and certificates purchased as presents as well as for personal use.
Sales surge during the holiday season, and this year, gift cards are expected to be a bigger chunk of spending, according to an annual holiday survey from Deloitte, a consulting, tax and advisory firm. Many consumers see them as a better bargain than apparel, food, beverages and other presents with inflation-sensitive prices, Deloitte said. Americans plan to spend an average of $300 on gift cards this winter, compared to $217 last year, the firm said.
Gift cards and certificates are well appreciated by merchants, too. Those who redeem them may splurge, and when they go unused, businesses benefit from what is essentially a zero-interest, unrestricted loan, experts said.
About 40% of consumers surveyed by Javelin said they usually or always spend more than normal when they have a gift card, and 30% stop by the store more frequently than usual, Hirschfield noted.
“Then you’ve got the opportunity to have them see and touch things,” which Hirschfield said may lead to upselling. Gift cards are "a really important portion of their merchandising strategy."
Businesses categorize gift cards on their books as a liability: they accept payment, and in return, promise to provide products or service at a later date. Selling a slew of these IOUs helps restaurants and bars make it through January and February, when foot traffic tapers off, said Stuart Blanck, whose Floral Park firm, PTFB Tech Corp, consults the hospitality industry on technology matters, including payment systems and gift card programs.
"They live on the gift card sales to get them through the winter," Blanck said. "It’s money in the bank that they have to pay bills, to pay their staff, to deal with year-end accounting and tax costs."
Nearly half of Americans — 47% — have unused gift cards, with an average value of $187 per person on them, according to Ted Rossman, senior industry analyst at Bankrate, a financial advice publication.
Companies will eventually consider about 1.5% of what's loaded on gift cards each year abandoned and label it "breakage," according to Javelin. The percentage is paltry, but the dollars involved are substantial. Americans have left about $21 billion unspent on gift cards, according to a survey released in early 2023 by Credit Summit, a financial advice website.
In many cases, no. Many vendors are required to eventually transfer gift cards and certificates to the New York comptroller, whose Office of Unclaimed Funds holds property until its rightful owner is identified.
If a card or certificate is inactive for five years, companies in-state and across the U.S. are obligated to send its balance to the Office of Unclaimed Funds if the owners' last known address was in New York, Comptroller Thomas DiNapoli's office said. If that's not known, businesses incorporated in New York must still pass it on to the comptroller.
DiNapoli's team said they have ways of connecting gift recipients with these IOUs that may seem anonymous. For instance, New Yorkers may be able to claim gift certificates purchased with cash if they know the certificate number and the date it was issued.
The comptroller’s office audits businesses to ensure they’re complying, and the attorney general’s office can investigate suspected violations. A record $48 million in gift cards was turned over to the comptroller's office last year, in part because James reached a $36 million settlement with H&M for holding onto $18 million in unused gift cards and a second agreement with Apple over nearly $3 million in retained gift cards, the comptroller’s office said. Unclaimed gift card balances are eventually moved into the state's general fund, but the state will still compensate owners who come forward with valid claims.
Gift certificates and cards can’t expire within nine years of being issued or reloaded, according to a state law that went into effect last December. A federal law says cards can't expire within five years.
Many national brands have made all of their cards comply with a California law that, generally, bars spending deadlines, experts said. That may explain why Long Islanders who've had trouble with merchants skirting the law say it has happened at small restaurants and shops, not big chain stores.
It's unclear how widespread violations are. Consumers may not be aware of the new nine-year law or how to complain when it's flouted. The state Division of Consumer Affairs received 26 complaints from Long Island that mention a gift card or certificate in descriptions of the dispute; five of these specifically cited expiration-related issues, according to data covering October 2020 to 2023. The division tries to mediate and reach a resolution for consumers, and may also refer people to the state Attorney General's Office.
Attorney General Letitia James' office accepts complaints directly, too. When asked for data on gift card and certificate-related disputes, her office told Newsday to submit a Freedom of Information Law request. The FOIL was pending as of publication time.
No, gift cards and certificates should retain their value. Under state law, nearly all fees — inactivity, redemption, service, renewal and administrative varieties — are prohibited, according to the state Division of Consumer Protection. Open-loop cards, however, may have a one-time activation fee of up to $9, the division said.
Curbing fees is critical, since they can gradually eat away the balance, Rossman said.
“That was snagging people more than expirations,” Rossman said.
Consumers can sue over violations of the federal law, but so far, courts haven't allowed cases based on the New York State law, according to Jay Hack, a partner at Gallet Dreyer & Berkey, LLP who serves banks and financial institutions.
Hack advises against legal action because it will be time-consuming and likely cost more than the amount of money at stake. A resolution often takes nothing more than a formal "demand letter" or request for money owned, he said.
“I have had many situations over the years in which the violation was a mistake resulting from a misunderstanding, and the consumer was made whole without a big fuss,” Hack said in an email.
The Attorney General's Office has the authority to take legal action against offenders, and a court may issue a civil penalty of up to $1,000 per violation, according to James' office. Besides alerting her office, consumers can file complaints with the federal Consumer Financial Protection Bureau, the state Division of Consumer Protection and local consumer affairs departments, which may help resolve the dispute or forward it to other government agencies for potential enforcement action.
New owners should factor outstanding gift cards into the terms of a sale and ensure that they will be honored, the Division of Consumer Protection said. Whether that's legally obligated will depend on the specific circumstances of each sale, the division said.
In practice, most entrepreneurs see accepting these gift cards as a way to maintain relationships with long-standing customers, said Chuck Bell, a financial policy advocate at Consumer Reports.
“Usually, they’re going to be honored if a store is purchased,” he said.
But if a business completely shuts down, customers are likely out of luck, experts said.
Potentially, whether businesses going through bankruptcy honor gift cards — and for how long — is at the discretion of the court. Judges often give consumers a deadline to redeem them, Bell said.
“You might get 30 to 60 days of warning that you have to go spend the card," he said. "Consumers aren’t following the economic fortunes of retail chains from day to day … a lot of people are going to miss those.”
If that happens, people can file a claim with the bankruptcy court. Over the course of the case, the judge will decide how to divvy up assets among various businesses and individuals who filed claims. Gift cardholders' IOUS are considered unsecured and will be given less priority than creditors whose loans were secured or backed up by collateral, according to consumer advice columnist Shelley Hunter, who goes by the name Gift Card Girlfriend.
For instance, Bed, Bath & Beyond filed for bankruptcy on April 23 last year, and the retailer wound up accepting gift cards through May 8, Hunter said. The retailer's current owners no longer honor gift cards purchased before Aug. 1 of last year, according to an FAQ on Bed, Bath & Beyond's website.
It's gift card season.
Over the next five weeks, many will eat a slice of turkey, wonder what qualifies as an ugly sweater and exchange gift cards.
Americans plan to spend more than 40% of their holiday budget on gift cards, according to a survey from Blackhawk Network, which provides gift cards, rewards and payment services. Gift cards are also a standard part of holiday festivities on Long Island, whether they’re welcome or not.
Raheeb Asif, 20, of Farmingdale, says he tends to receive products as presents, but would prefer gift cards, particularly to big box stores. They’re quite easy to use, he said.
WHAT TO KNOW:
- More than 40% of holiday budgets will be spent on gift cards, based on a survey of American consumers by Blackhawk Network.
- Cards can't expire within nine years under a relatively new state law.
- Most fees are prohibited, including dormancy fees, administrative fees and reloading fees.
And when you have a gift card to spend, “you’re more inclined to splurge a little bit,” said Asif, a college student.
Jasmine Lopez, 25, of Carle Place, expects to get gift cards, even though she’s not a big fan of them. As a retail store manager, Lopez said she often has customers struggle to redeem the cards, many times because scammers seem to have accessed card funds.
Raheeb Asif of Farmingdale says he prefers gift cards to presents. Jane Kampton of Long Beach, shown with her husband Paul Bender, says she often has cards left with a small balance "that never gets spent.” Credit: Howard Schapp
“Is it convenient?” she said. “Something’s always up.”
Despite stocking up on Starbucks cards in years past, Jane Kampton, 69, and Paul Bender, 71, a married couple from Long Beach, don’t envision giving many gift cards this year.
Bender, a retired dentist, once handed them out to patients and those who referred clients to his practice.
“I used to buy Starbucks cards 20, 30 at a time,” he said.
Kampton, who used to work near a Starbucks in New York City, finds it harder to remember to use gift cards now that she is retired.
“It expires, or I use part of it, and it has a $4.78 balance and then that never gets spent,” she said.
A new state law takes the pressure off New Yorkers who lose track of gift cards. Any gift cards or certificates issued from Dec. 10, 2022, on can’t expire within nine years. The measure also prohibits brands from hitting more leisurely shoppers with inactivity fees.
Some in the region are skirting the law, consumers say. John Leonard, of North Bellmore, said his wife received a $200 gift certificate to a restaurant when she retired in spring 2022. She had to pay out of pocket when getting takeout this August because the venue said the gift certificate was only good for one year, Leonard said.
“There’s a lack of education on this whole subject,” he said.
Here’s a look at what else consumers should know about the booming gift card industry:
How big is the gift card market?
Big.
Gift cards consistently top Americans' wish lists because they let people pick out what they want without the hassle of exchanging an unwanted present or returning it for store credit, according to Jordan Hirschfield, director of prepaid advisory services at Javelin Strategy & Research, which consults clients on financial services. Recipients slightly prefer "open loop" cards — those that are widely redeemable and carried by major payment networks like Visa or Mastercard, according to Javelin surveys. But gift-givers favor "closed loop" cards — those restricted to one restaurant or brand — because they view it as a more personal present, he said.
"Gift cards are the number one requested item," Hirschfield said. "The reason is: it's choice. I get to buy what I want."
The closed loop market in the U.S. is expected to hit $192 billion in 2023, and its open loop counterpart is estimated to reach $34 billion, according to Javelin's research, which includes gift cards and certificates purchased as presents as well as for personal use.
Sales surge during the holiday season, and this year, gift cards are expected to be a bigger chunk of spending, according to an annual holiday survey from Deloitte, a consulting, tax and advisory firm. Many consumers see them as a better bargain than apparel, food, beverages and other presents with inflation-sensitive prices, Deloitte said. Americans plan to spend an average of $300 on gift cards this winter, compared to $217 last year, the firm said.
How popular are they with merchants?
Manager Phil Ziccardy at the gift card display at King Kullen in Patchogue. Credit: John Roca
Gift cards and certificates are well appreciated by merchants, too. Those who redeem them may splurge, and when they go unused, businesses benefit from what is essentially a zero-interest, unrestricted loan, experts said.
About 40% of consumers surveyed by Javelin said they usually or always spend more than normal when they have a gift card, and 30% stop by the store more frequently than usual, Hirschfield noted.
“Then you’ve got the opportunity to have them see and touch things,” which Hirschfield said may lead to upselling. Gift cards are "a really important portion of their merchandising strategy."
Businesses categorize gift cards on their books as a liability: they accept payment, and in return, promise to provide products or service at a later date. Selling a slew of these IOUs helps restaurants and bars make it through January and February, when foot traffic tapers off, said Stuart Blanck, whose Floral Park firm, PTFB Tech Corp, consults the hospitality industry on technology matters, including payment systems and gift card programs.
"They live on the gift card sales to get them through the winter," Blanck said. "It’s money in the bank that they have to pay bills, to pay their staff, to deal with year-end accounting and tax costs."
How many gift cards go unused?
Nearly half of Americans — 47% — have unused gift cards, with an average value of $187 per person on them, according to Ted Rossman, senior industry analyst at Bankrate, a financial advice publication.
Companies will eventually consider about 1.5% of what's loaded on gift cards each year abandoned and label it "breakage," according to Javelin. The percentage is paltry, but the dollars involved are substantial. Americans have left about $21 billion unspent on gift cards, according to a survey released in early 2023 by Credit Summit, a financial advice website.
Can businesses just keep the unused balances?
In many cases, no. Many vendors are required to eventually transfer gift cards and certificates to the New York comptroller, whose Office of Unclaimed Funds holds property until its rightful owner is identified.
If a card or certificate is inactive for five years, companies in-state and across the U.S. are obligated to send its balance to the Office of Unclaimed Funds if the owners' last known address was in New York, Comptroller Thomas DiNapoli's office said. If that's not known, businesses incorporated in New York must still pass it on to the comptroller.
DiNapoli's team said they have ways of connecting gift recipients with these IOUs that may seem anonymous. For instance, New Yorkers may be able to claim gift certificates purchased with cash if they know the certificate number and the date it was issued.
The comptroller’s office audits businesses to ensure they’re complying, and the attorney general’s office can investigate suspected violations. A record $48 million in gift cards was turned over to the comptroller's office last year, in part because James reached a $36 million settlement with H&M for holding onto $18 million in unused gift cards and a second agreement with Apple over nearly $3 million in retained gift cards, the comptroller’s office said. Unclaimed gift card balances are eventually moved into the state's general fund, but the state will still compensate owners who come forward with valid claims.
How long are gift cards good for?
Gift certificates and cards can’t expire within nine years of being issued or reloaded, according to a state law that went into effect last December. A federal law says cards can't expire within five years.
Many national brands have made all of their cards comply with a California law that, generally, bars spending deadlines, experts said. That may explain why Long Islanders who've had trouble with merchants skirting the law say it has happened at small restaurants and shops, not big chain stores.
Are businesses following the law?
It's unclear how widespread violations are. Consumers may not be aware of the new nine-year law or how to complain when it's flouted. The state Division of Consumer Affairs received 26 complaints from Long Island that mention a gift card or certificate in descriptions of the dispute; five of these specifically cited expiration-related issues, according to data covering October 2020 to 2023. The division tries to mediate and reach a resolution for consumers, and may also refer people to the state Attorney General's Office.
Attorney General Letitia James' office accepts complaints directly, too. When asked for data on gift card and certificate-related disputes, her office told Newsday to submit a Freedom of Information Law request. The FOIL was pending as of publication time.
Will gift card balances drop if shoppers take their time?
No, gift cards and certificates should retain their value. Under state law, nearly all fees — inactivity, redemption, service, renewal and administrative varieties — are prohibited, according to the state Division of Consumer Protection. Open-loop cards, however, may have a one-time activation fee of up to $9, the division said.
Curbing fees is critical, since they can gradually eat away the balance, Rossman said.
“That was snagging people more than expirations,” Rossman said.
What can consumers do about businesses that break the rules?
Consumers can sue over violations of the federal law, but so far, courts haven't allowed cases based on the New York State law, according to Jay Hack, a partner at Gallet Dreyer & Berkey, LLP who serves banks and financial institutions.
Hack advises against legal action because it will be time-consuming and likely cost more than the amount of money at stake. A resolution often takes nothing more than a formal "demand letter" or request for money owned, he said.
“I have had many situations over the years in which the violation was a mistake resulting from a misunderstanding, and the consumer was made whole without a big fuss,” Hack said in an email.
The Attorney General's Office has the authority to take legal action against offenders, and a court may issue a civil penalty of up to $1,000 per violation, according to James' office. Besides alerting her office, consumers can file complaints with the federal Consumer Financial Protection Bureau, the state Division of Consumer Protection and local consumer affairs departments, which may help resolve the dispute or forward it to other government agencies for potential enforcement action.
What happens if a store is bought out or goes out of business?
New owners should factor outstanding gift cards into the terms of a sale and ensure that they will be honored, the Division of Consumer Protection said. Whether that's legally obligated will depend on the specific circumstances of each sale, the division said.
In practice, most entrepreneurs see accepting these gift cards as a way to maintain relationships with long-standing customers, said Chuck Bell, a financial policy advocate at Consumer Reports.
“Usually, they’re going to be honored if a store is purchased,” he said.
But if a business completely shuts down, customers are likely out of luck, experts said.
What happens if a business goes bankrupt?
Potentially, whether businesses going through bankruptcy honor gift cards — and for how long — is at the discretion of the court. Judges often give consumers a deadline to redeem them, Bell said.
“You might get 30 to 60 days of warning that you have to go spend the card," he said. "Consumers aren’t following the economic fortunes of retail chains from day to day … a lot of people are going to miss those.”
If that happens, people can file a claim with the bankruptcy court. Over the course of the case, the judge will decide how to divvy up assets among various businesses and individuals who filed claims. Gift cardholders' IOUS are considered unsecured and will be given less priority than creditors whose loans were secured or backed up by collateral, according to consumer advice columnist Shelley Hunter, who goes by the name Gift Card Girlfriend.
For instance, Bed, Bath & Beyond filed for bankruptcy on April 23 last year, and the retailer wound up accepting gift cards through May 8, Hunter said. The retailer's current owners no longer honor gift cards purchased before Aug. 1 of last year, according to an FAQ on Bed, Bath & Beyond's website.
Experts' tips on buying gift cards:
- Buy directly from the merchant and avoid third-parties with discounted cards, which may be scams.
- When shopping in person, try to buy cards from behind a counter or register, where it would be harder for people to tamper with them.
- If cards are not displayed that way, select one that's deep on the shelf or product hook.
- Pay using a card, which will provide a record of the transaction if the receipt gets lost.
- Include the activation slip when giving the card, which can help merchants troubleshoot issues.
- Register gift cards and certificates with any website printed on them for additional protection.
Advice for spending gift cards:
- Immediately change any security code or pin associated with gift cards.
- Tuck them in your wallet so they won't get lost.
- If cards are only accepted at restaurants or shops you dislike, sell them to a friend who is fond of the brand.
- Make a plan for any older gift cards and certificates you have stashed away.
- Consider using them to buy presents, or regifting or donating them.
- As a last resort, sell them on CardCash.com or Raise.com for less than their value, Consumer Reports advises.
- You may get the balance back in cash once it falls below $5 under state law.
- Put multiple gift cards with small balances toward one item by shopping in person.
Sarina Trangle covers affordability and cost of living issues and other business topics. She previously worked as an editor and reporter at amNewYork.
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