Gift Cards / Vouchers - Why do they have expiry dates?

[cove]

I cannot say I know anyone who is in a union. I think I will ask at the pool.

 

[mushez]

My job gives me quite a bit of exposure to the financials that underly gift vouchers so I'd be happy to answer any questions.

While the cash definitely doesn't sit in a tin under the CEO's desk, there is an accounting entry for the liability.

Saying that, there is a very predictable percentage that aren't redeemed within the validity period. Unclaimed vouchers & gift cards (known as non-redemption) are a definite income stream (recognised at time of sale so it's instant profit) but usually not the reason for the program.

Often vouchers are sold at a discount (groupon, living social etc.) and that discount is only possible because of the non-redemption percentage offsetting some of the discount.
Also, third party costs can be quite high (10-20%). This refers the money paid to supermarkets, post offices, Westfield etc. when they aren't sold direct.

In my experience, gift vouchers/cards would not exist in many mature businesses without non-redemption. Thats the way that companies can justify the hard costs and internal resources that accompany the services. Sure, there will always be some people who realise they missed out on using their voucher however for the most common gift cards 1 year is pretty sufficient. Most people make plenty of trips to the supermarket/shopping centre/hardware store/cinema in that time. And if you don't, maybe you gift giver doesn't know you very well.

Couldn't have explained it better myself.

Gift vouchers cost money to issue and manage and the only ways this is covered and extra profit may be had is through non redemptions.

It is a catch 22, without an expiry there wouldn't be gift cards, and if they were not allowed to put an expiry, you would find few would offer them.

 

[dajop]

Gift vouchers cost money to issue and manage and the only ways this is covered and extra profit may be had is through non redemptions..

For large businesses like Myer, Woolies, etc I am sure non redemptions is not the ONLY way if covering the costs. There must also be a benefit of receiving cash into the business earlier than it is used.

 

[Andyc]

For large businesses like Myer, Woolies, etc I am sure non redemptions is not the ONLY way if covering the costs. There must also be a benefit of receiving cash into the business earlier than it is used.

It's pretty marginal. The vast majority of redemptions are within 1-2mths of purchase so that's 1-2mths interest earned/saved. A benefit of maybe 1% of gift card sales value.
Every percentage point counts, but it's certainly not a major incentive.

 

[Jurahn]

In the US, new rules were brought in a few years ago regarding gift cards:

FRB: Consumer Information: What you Need to Know: New Rules for Gift Cards

and it appears they have to give an expiry date of at least 5 years (with a few exceptions such as pre-paid Visa/Mastercard etc, and gift cards/vouchers given as part of a promotion). A number of the gift cards sold in the US don't seem to have expiry dates at all - I recently bought a Cheesecake Factory e-gift card for our upcoming US trip as we know we'll be eating there a couple of times (so can now pay for our meals there at a better exchange rate than we'll get by the time we travel!) and it has no expiry date. An added bonus, they were running a promotion at the time and with every $25 you spent on gift cards (we bought a $100 one), you got a voucher for a free slice of cheesecake, so I got 4 vouchers! They're all valid until the end of March and we're travelling Feb/March so I'm sure we'll use those no trouble at all

 

[cove]

Have used raise.com to get US retailer gift cards. They e- delivered the voucher and some savings are up to 20%.
The other site is giftcardgranny.com that has good deals.
It is worth spending a few minutes to get good savings.