What happens to unused gift-card money?
A card with US$3.40 left on it can sit in a drawer for years. The amount is too small for a whole purchase, the shop is out of the way, or the card has simply been forgotten. Where is that money while nobody uses it?
For a retailer’s own gift card, the payment has usually already reached the business. What remains is a promise to provide something when the cardholder spends the balance. Over time, some unused value may become revenue in the company’s accounts; some may have to go to an unclaimed-property authority. Neither outcome gives you a universal expiry date for your card.
The business receives cash before it earns the sale
Consider an ordinary store card sold at face value in the United States. This is an illustrative example, ignoring taxes and fees: someone pays US$25 for the card, then its recipient uses US$20 to buy goods.
At the first step, the retailer receives US$25 and records a US$25 liability. A liability is an obligation the business still has to meet. Here, it owes future goods or services. Accountants often call this deferred revenue because the money has arrived before the sale has been earned.
When the recipient makes that US$20 purchase, the retailer recognises US$20 of revenue and reduces the liability. Before any breakage adjustment, US$5 remains outstanding. The cardholder has US$5 to spend even though the retailer received the cash earlier.
That liability is an accounting entry. It does not establish that the retailer keeps an individual pot of cash for every card. Nor should a store card be treated as a savings account: you have prepaid for purchases from a particular business.
The amounts can be substantial. The US retailer Target reported US$1.209 billion of gift-card liabilities at the end of its 2024 financial year, which ended on February 1, 2025. That figure was already reduced by estimated breakage. It was an outstanding liability at one date, rather than a measure of how much customers permanently lost during the year.
“Breakage” is an estimate of what will remain unused
Some cards are never redeemed. Others are partly spent and then forgotten. Businesses use the term breakage for value they expect customers will not use.
For store cards covered by the US revenue standard, a company that expects to be entitled to that amount can recognise estimated breakage in proportion to redemptions. The estimate needs support; a business cannot simply decide that every old balance is now income. If it cannot support early recognition, it waits until the likelihood of the remaining rights being exercised becomes remote.
A small example shows why this can happen before individual cards expire. Suppose a retailer sells US$1,000 of cards and has a supported estimate that US$950 will eventually be redeemed, leaving US$50 of breakage that it is entitled to retain. These are invented numbers to explain the method, not an industry breakage rate.
Once customers redeem US$475, they have used half the expected US$950. The retailer therefore recognises half the expected breakage, US$25, alongside the US$475 from purchases. That extra US$25 changes its reported revenue and liability. The calculation does not identify a particular customer’s US$25 card to cancel.
Target’s report says its gift cards do not expire, while also describing proportional breakage recognition. Both statements can be true. The accounts estimate how much of a group of balances will be used; the terms and applicable law determine what a particular cardholder can claim.
Starbucks offers another example of the scale. In its 2025 annual report, it disclosed US$200.4 million of breakage revenue in its company-operated store business and US$22 million in its licensed-store business. Those are company-wide figures across those businesses, not a count of unused US cards. The same report says its stored-value cards have no expiry date or balance-reducing service fees in many company-operated markets, including the US.
Breakage recognition does not bring in a second payment: the cash was received earlier. It also should not be confused with a fee deducted from someone’s card, or with an automatic right for the company to reject a later purchase.
Expiry rules answer a different question
A balance can remain legally usable while a company expects it will never be spent. Conversely, a valid expiry date or a permitted fee can affect what the cardholder has left. To work out your rights, you need the card’s terms, its type, and the jurisdiction that applies.
In the United States, federal gift-card rules generally protect covered funds for at least five years from issuance or the last load. Dormancy, inactivity and service fees require at least a year without activity, disclosure, and no more than one such fee per month. State law may provide stronger protection. That five-year minimum is neither an instruction to expire every card after five years nor a rule for every country or prepaid product. Promotional cards can fall under different provisions.
The date printed on a card also may concern the card itself rather than the underlying funds. If it has passed, ask the issuer whether the funds remain available and how to obtain a replacement. Losing the card is a separate problem; keep the receipt and card details securely.
Digital credit needs another check. US official guidance distinguishes an unredeemed gift card from a card fully redeemed into a merchant account. Once the whole value has moved to that account, the gift-card rule’s five-year minimum no longer applies to those funds. Check the wallet’s terms as well as the original code’s terms; moving the value does not automatically extend every protection.
Some balances go to an unclaimed-property office
Where unclaimed-property law requires a company to hand over unused value, that amount is a liability to be remitted, rather than breakage revenue it can keep. The process is often called escheatment. Which balances are covered and when they must be transferred depend on the applicable law.
New York’s unclaimed-funds office reported receiving over US$21 million from gift cards in 2024. Its guidance says balances may be transferred after five years of inactivity. “Received” here means money collected by the office, not necessarily money already returned to cardholders.
The office also explains why keeping the card matters. If a New York retailer does not know the owner’s name, it can report the card number and balance instead. Those details can help the owner claim the funds. A search under your name alone may therefore miss a card whose owner was never identified.
A transfer is a reason to ask about the claim process, not to assume the money has vanished or that every forgotten card will appear in a public database. Start with the issuer to establish whether a transfer happened and which authority received it.
Make the remaining balance usable
For the US$3.40 card in the drawer, check the actual balance through the issuer’s official service. Then establish whether it is still on the card, already in a wallet, or subject to a reported transfer.
If it remains available, ask whether you can combine it with another payment on a purchase you already want. Also check whether the issuer or local law allows a small balance to be paid out in cash. Neither option is universal, and buying something unnecessary just to empty the card can cost more than leaving it alone.
If support says the balance is gone, ask for the reason and any relevant transaction date: was it spent, reduced by fees, expired, or sent to an unclaimed-property authority? Those answers lead to different next steps. A company’s breakage figure cannot tell you which one happened to your card.
