Unused Value in Prepaid Cards: Breaking the Misconceptions

There’s a misconception that gift cards and other prepaid products go unused, but the trends of consumer use and product growth defy that belief, creating profit centers for issuing organizations. The fact that gift cards encourage additional spending and have many other uses, such as receiving loyalty cards as an employee incentive or creating goodwill opportunities, promotes rapid redemption, thus mitigating issues with unused funds. The use of stored-value accounts emphasizes that loyalty provides extra benefits and encourages repetitive reloads, reducing the amount of unused funds that companies must account for.

To strengthen and maintain prepaid programs, organizations should communicate often with the appropriate stakeholders, such as consumers, shareholders, and employees. Communication encourages the spending of unused balances, highlights the value of loyalty programs associated with stored-value accounts, and can act as a way to avoid escheatment where it is regulated. Retailers must also be clear with policies to ensure compliance with various states’ cash-out and escheatment regulations, which can be accomplished through universal policies, proper staff training, and regular reviews of applicable regulations by location.

Key questions addressed in this report:

• How often do consumers leave unused value on gift cards?
• How does consumer behavior affect the use of gift cards and stored-value accounts?
• What happens to balances on unused prepaid cards?
• What regulatory issues should issuers and prepaid managers be aware of when they consider unused value?

Companies Mentioned:

Amazon, Walmart, Starbucks, Chick-fil-A, Target, Best Buy, Nordstrom, Home Depot, REI