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

[Cruiser Elite]

This topic certainly deserves it's own thread IMHO - so many AFFers and indeed society in general have been caught at one time or another with gift cards / vouchers that have expired prior to redemption.

Is this fair? Do providers deserve some protection or is expiration date merely a profit generator? Should consumer bodies be acting to change existing systems?

TBH I have been caught multiple times - mostly by Village Theatres with Gold Class Gift Certificates - they certainly show no mercy. AFF members experiences / thoughts?

 

[harvyk]

They need expiry dates so that the company knows exactly what date they can call the money their own. Let's say that a company sells a million dollars worth of vouchers... At some point in time they are going to need to supply the goods and / or services as promised by the vouchers, thus their accountants will need to hold onto the money until the time that the vouchers are used or expires.

This would mean that they would need to place money aside to cover the costs of redeeming the voucher until at which time the voucher was redeemed, by having an expiry date they have a certain date at which they can state the money is now theirs, either through redemption of the voucher, or via the voucher expiring.

The other thing is inflation and / or cost of supplying said goods or services at the time of redemption. Since prices are never static. Lets say you purchase a voucher for entry into a movie, the voucher costs $10. If that had no expiry date you could in theory use that voucher in 10 years time. Let's say the cinema's cost is $5 to supply said movie (thus a $5 profit) in 2014. In 2024 the cost might actually be $11 for the cinema to supply said movie and the normal ticket price is $20. Now not only has the cinema needed to keep hold of that $10 on the off chance that you may decide to use the voucher, when you actually did use the voucher it has cost the cinema money to supply said service.

 

[dajop]

I don't think the question is so much should vouchers have an expiry date, but more what is reasonable term. I think 1 year is too short, 2 or 3 is more reasonable.

Also the argument about services costing more is only relevant in a very specific set of circumstances where you get a product voucher rather than a dollar voucher (eg movie vouchers) as most are cash so for most vouchers that argument is irrelevant.

 

[Cruiser Elite]

Now not only has the cinema needed to keep hold of that $10 on the off chance that you may decide to use the voucher, when you actually did use the voucher it has cost the cinema money to supply said service.

But the cinema does not 'keep hold' of the cash by stashing it in a tin in CEO's office - it is absorbed into normal cash flow and 'used' in the business like all other cash.

And then if voucher not used - 100% clear profit - ZERO cost of sales. Don't be giving too much sympathy for these companies - if they can't structure their accounting systems in incorporate vouchers if they desire ti implement them then that is their problem - not the consumers / customers.

FTR - we do not sell vouchers but we give away $99 vouchers which have specific Ts & Cs clearly printed on them - redeemable once for of purchase certain goods with no exceptions - not redeemable for cash - cannot be used in conjunction any other promotion - once off use - no expiration date. As for forgery I would love someone to forge a couple thousand of them and come use them in our business - would LOVE IT.

 

[harvyk]

But the cinema does not 'keep hold' of the cash by stashing it in a tin in CEO's office - it is absorbed into normal cash flow and 'used' in the business like all other cash.

And then if voucher not used - 100% clear profit - ZERO cost of sales. Don't be giving too much sympathy for these companies - if they can't structure their accounting systems in incorporate vouchers if they desire ti implement them then that is their problem - not the consumers / customers.

FTR - we do not sell vouchers but we give away $99 vouchers which have specific Ts & Cs clearly printed on them - redeemable once for of purchase certain goods with no exceptions - not redeemable for cash - cannot be used in conjunction any other promotion - once off use - no expiration date. As for forgery I would love someone to forge a couple thousand of them and come use them in our business - would LOVE IT.

They might not "keep hold" of the money they collect from a voucher sale per say, and certainly not in a tin under the managers desk, that said it will be an entry on the books (or if it's not the company will probably be looking for a new accountant before too long).

When a person redeems a valid voucher the company must honour it, no choices (unless bankrupt or similar type of reason). The company can't say "we can't honour your voucher this month since cash is a little tight". Most likely there is a cost to the company in honouring said voucher. Be it one less seat they can sell for actual money on the spot, be it the cost of actually providing the goods, and ultimately that money has to come from somewhere.

Ultimately having an expiry date limits the liability that the company has.

 

[aaronjames000]

They need expiry dates so that the company knows exactly what date they can call the money their own. Let's say that a company sells a million dollars worth of vouchers... At some point in time they are going to need to supply the goods and / or services as promised by the vouchers, thus their accountants will need to hold onto the money until the time that the vouchers are used or expires.

This would mean that they would need to place money aside to cover the costs of redeeming the voucher until at which time the voucher was redeemed, by having an expiry date they have a certain date at which they can state the money is now theirs, either through redemption of the voucher, or via the voucher expiring.

The other thing is inflation and / or cost of supplying said goods or services at the time of redemption. Since prices are never static. Lets say you purchase a voucher for entry into a movie, the voucher costs $10. If that had no expiry date you could in theory use that voucher in 10 years time. Let's say the cinema's cost is $5 to supply said movie (thus a $5 profit) in 2014. In 2024 the cost might actually be $11 for the cinema to supply said movie and the normal ticket price is $20. Now not only has the cinema needed to keep hold of that $10 on the off chance that you may decide to use the voucher, when you actually did use the voucher it has cost the cinema money to supply said service.

That's all well and good if its a voucher for a particular item... then I totally agree with your example and if I was a business owner I would want to control how long people had to redeem said voucher..

But what about a voucher of a particular dollar value? Wouldn't it be in the interest of the company to have no expiry date and allow the voucher owner to hold on to it as long as possible (and possibly even forget about it)?

It would essentially be an interest free loan from the customer and due to inflation, at some point in the future it would be worth less (by way of its purchasing power) than they originally paid for it?

 

[harvyk]

That's all well and good if its a voucher for a particular item... then I totally agree with your example and if I was a business owner I would want to control how long people had to redeem said voucher..

But what about a voucher of a particular dollar value? Wouldn't it be in the interest of the company to have no expiry date and allow the voucher owner to hold on to it as long as possible (and possibly even forget about it)?

It would essentially be an interest free loan from the customer and due to inflation, at some point in the future it would be worth less (by way of its purchasing power) than they originally paid for it?

In a way a $50 voucher is an "interest free loan", and in a way that's exactly how banks work. The problem is unless your business is money management, issuing out a $50 voucher means that you now need to hold on to said money (or more accurately mark the liability in your books) until that voucher has been redeemed in full. Since a good number of vouchers do get put into biscuit tins and forgotten about for many years it in theory means that a business could have that liability on their books for many years in not indefinitely.

Most business I know of will do something to limit liabilities, eg QF expiring points in inactive accounts through to employers forcing employees take annual leave (or lose it).

There is also the fact that issuing vouchers is not a free activity, it costs the company time and money to design and print vouchers, it then costs the company time and money to actually sell vouchers. They do it since it is effectively a promise that you will use the services of the company at some point in the future, but the company can't actually use the money you've just given to them (and that they are effectively holding for you) until the voucher is redeemed or it expires.

 

[dajop]

There is also the fact that issuing vouchers is not a free activity, it costs the company time and money to design and print vouchers, it then costs the company time and money to actually sell vouchers. They do it since it is effectively a promise that you will use the services of the company at some point in the future, but the company can't actually use the money you've just given to them (and that they are effectively holding for you) until the voucher is redeemed or it expires.

But they can use that money, in the same way airlines do (essentially airline tickets are just vouchers with specific conditions attached to them). Of course they can.

Smaller, leveraged companies can certainly use that money to reduce overdrafts, larger companies with sophisticated treasury functions I am sure would also use the cash in an advantageous way. I refuse to believe companies just issue vouchers - at a cost - just for the promise of future business. It is combination of marketing and promotion plus getting cash into the business earlier than otherwise would be the case.

Also I'd bet leakage would far outweigh the costs of running the scheme, even for those with longer expiry times.

 

[harvyk]

Also I'd bet leakage would far outweigh the costs of running the scheme, even for those with longer expiry times.

Agree 100%, however the key words are longer expiry times. If there are no expiry dates, then there is no leakage, since at any point in the future a person could conceivably walk into your store, place down a 50 year old voucher, and say I want that item over there, and without the expiry date on that voucher (and short of any legal limitations on vouchers which I'm not aware of) you'd be forced to honour the voucher.

Of course, this is all bouncing around the real issue of "because they can" with the payoff being at the expiry date if the voucher has not been used, they have just sold a piece of paper for $100 which cost them perhaps 50c to make / cost of sales.

 

[burmans]

Agree 100%, however the key words are longer expiry times. If there are no expiry dates, then there is no leakage, since at any point in the future a person could conceivably walk into your store, place down a 50 year old voucher, and say I want that item over there, and without the expiry date on that voucher (and short of any legal limitations on vouchers which I'm not aware of) you'd be forced to honour the voucher.

Of course, this is all bouncing around the real issue of "because they can" with the payoff being at the expiry date if the voucher has not been used, they have just sold a piece of paper for $100 which cost them perhaps 50c to make / cost of sales.

While this is of course true, would have to suggest it's not really material. If you haven't redeemed n a year chances are you wont, and frankly $100 if it happens one off is a rounding error for most big companies!

 

[cove]

Where can I get $2000 of Coles Gift cards for $1900 now? It seems the previous sources don't have them any more.

 

[JohnK]

Not sure I understand why there is an expiry date.

If I buy a $100 voucher this should never expire. There are IT systems in place that would be able to track the usage of the voucher and the value remaining. The dollar value is never going to appreciate so whether you use the voucher today or in 10 years time it will get you $100 off the goods and services they provide.

I think serfty mentioned the business expects ~30% shrinkage? It is sad they are selling a service and then hope that people will forget to use it and make a clear profit without providing anything in return.

 

[spudseamus]

That's why I love Bunnings cards ! They never expire

 

[cove]

Bunnings would be the last place I would buy a gift voucher. I will wait for that company to expire or get taken over by a suitor.

 

[Andyc]

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.

 

[PLANT]

Cove for cash..... I can get as many as you need..... Pm me as still have a source but unfortunately I cannot use credit card but they are 5% off..... Pm me

 

[dajop]

Victorian Consumer Affairs lists some requirements:

Gift cards or vouchers:

• must clearly display the expiry date. For more information on using a gift card after expiry, visit our Gift vouchers and gift cards - fair trading page.
• can be used more than once
• cannot be reloaded (that is, the value cannot be increased or added to)
• cannot be redeemed for cash unless there is a remaining amount that, in the reasonable opinion of the trader, cannot be conveniently used.

So some scenarios for cards (both purchased in Victoria):
1) Gift card said expires 2 years from purchase .... but purchase date on gift card was not entered the seller of the card into the space it was supposed to. Sent image of card to seller showing the lack of card "clearly display(ing) the expiry date" and was basically told to ##&*#$ off (in politer terms than that, but meaning the same).
2) Gift card that only lists date of issue with no reference to expiry date... with reference to a website for card T&C. Well known i-multinational.

1) Considered taking further as value is higher. 2) Too small to worry about, other than the principle.

 

[whatmeworry]

Recent USA study.

A staggering $44 billion in gift cards have gone unused in the last six years.

Unused gift cards total $44B since 2008: study | New York Post

 

[cove]

Yes I read that this morning. I have about $1000 US in gift cards but they are the 20% off non expiring restaurant cards from Costco for Flemings and McCormick. Yum!
So far I am doing well on these as the Aussie dollar has dropped since I bought them so it is an investment in the future.

 

[burmans]

Where can I get $2000 of Coles Gift cards for $1900 now? It seems the previous sources don't have them any more.

Union shopper has them

https://www.unionshopper.com.au/us-offer/coles-gift-cards/

Surely you know someone who belongs to a union (and frankly its not a hard restriction to get around)