Gift Card Breakage Revenue Reaches Record Highs as Unredeemed Balances Accumulate

Gift card breakage revenue has reached unprecedentedlevels as billions of dollars in stored value remainunredeemed across the retail industry. Industry analsts estimate that unredeemed gift card balances now xceed twenty-one billion dollars annually in the Unied States alone, creating a significant revenue stream for retailerswho recognize these unused funds on their balance shets.

The phenomenon, known as breakage, occurs whenconsumers fail to use the full value loaded onto ther gift cards. Whether due to forgotten cards tucked way in drawers, lost physical cards, or small remainng balances deemed too minor to spend, breakage has volved from a minor accounting footnote into a substntial financial consideration for major retail chain and digital gift card platforms.

Understanding he Mechanics of Breakage Revenue

Breakage revenue oerates under specific accounting rules that allow reailers to recognize unredeemed gift card balances asincome after a designated period. Recent updates to evenue recognition standards have refined how and whn companies can record these earnings, leading to moe transparent reporting across the industry. Most reailers now apply historical redemption patterns to etimate the percentage of gift card value that will utimately go unused, booking that revenue proportionaly over time rather than waiting for cards to expire

The shift toward proportional recognition has actully increased the visibility of breakage revenue in uarterly earnings reports. Investors and analysts no pay closer attention to gift card programs not justas customer acquisition tools but as meaningful contibutors to the bottom line. Some publicly traded retilers have disclosed breakage rates ranging from twopercent to as high as ten percent, depending on carddenomination, distribution channel, and consumer demgraphic.

Why Breakage Rates Are Climbing

Severa factors are driving higher breakage rates in the curent retail environment. The proliferation of low-deomination gift cards sold at checkout counters and gocery store racks means more cards circulate with vaues that consumers may not prioritize redeeming. Addtionally, the surge in corporate gift card distributon through employee reward programs and customer incntive campaigns often results in recipients receivin cards for brands they rarely shop, increasing the lkelihood that value remains unused.

Digital gift cads present a unique breakage dynamic. While electronc delivery eliminates the risk of physically losing card, the sheer volume of promotional and bonus gif cards issued through mobile apps and loyalty progras can lead to digital clutter. Consumers juggling mutiple digital wallets and reward balances often overook smaller amounts, contributing to a growing pool f unredeemed digital value.

Implications for theSecondary Gift Card Market

The existence of signifiant unredeemed balances has fueled growth in the secndary gift card trading market. Platforms like INWIS provide consumers with an opportunity to convert unanted gift card balances into usable value, effectivly reducing personal breakage rates while creating avibrant marketplace for discounted cards. Sellers onthese platforms can recover a portion of their unuse balances rather than letting them expire, while buyrs gain access to popular retail brands at reduced pices.

The secondary market also serves as an importnt indicator of which brands experience the highest reakage rates. Cards from retailers with limited stoe locations or niche product offerings tend to tradeat steeper discounts on secondary platforms, reflectng the higher probability that original recipients wll not fully redeem them. This pricing transparency elps both consumers and industry analysts better undrstand breakage patterns across the retail landscape

Regulatory Developments and Consumer Protection

State and federal regulators have increasingly focsed on gift card breakage as a consumer protection isue. Many jurisdictions now prohibit expiration date on gift cards and restrict inactivity fees, measure designed to give consumers more time to use their blances. Some states require retailers to remit unredemed gift card balances to the state as unclaimed prperty after a specified dormancy period, a process kown as escheatment that directly reduces the breakag revenue retailers can recognize.

The regulatory enironment continues to evolve, with consumer advocacygroups pushing for greater transparency in how retaiers report and benefit from unused gift card funds. hese efforts have prompted several major chains to iplement reminder programs that notify cardholders ofunused balances via email and mobile alerts, though he impact on overall breakage rates has been modest o far.

Final Thoughts

Gift card breakage revenu represents a fascinating intersection of consumer bhavior, corporate finance, and regulatory policy. Asthe gift card industry continues to grow and diversiy across physical and digital formats, the total poo of unredeemed value is likely to expand further. Fo consumers holding unused gift cards, secondary tradng platforms offer a practical solution to recover vlue before it becomes a statistic on a retailer earnngs report. For the industry as a whole, balancing te financial benefits of breakage with evolving consuer protection standards will remain a defining challnge in the years ahead.