Gift Card Breakage

Gift Card Breakage is a term that refers to value on prepaid debit gift cards that have been sold but that was never redeemed or used by the cardholder. Revenue from breakage is almost entirely profit, since companies need not provide any goods or services for unredeemed gift cards.

US States have varying regulations about the accounting practices of unused gift cards. Some states consider unredeemed gift cards to be abandoned property, and as such lay claim to the value of unredeemed cards. Retailers oppose such laws, because it pays for the expense of issuing and accounting for the card, only to have the value on the card confiscated by the government.

Some retailers have also imposed conditions on gift cards, such as expiration dates or monthly service fees that periodically reduce the value of the gift card. However, some states, such as California, Connecticut, and Massachusetts, as well as Ontario in Canada have deemed such regulations illegal.

Some companies have been criticized for using estimated breakage to improve their revenue numbers.

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