OUR THOUGHTS ON:

Do Yinz Have Yer Iggle Card? - Using Gift Cards to Raise Money in Your Community

Audit|Retail

By Steven Franz

Hockey tryouts.  Its time to sign-up and buck up.  Time to pencil in the teams and figure out the fundraisers.  Involvement in youth hockey means that the emails are flying, and the committees are working their magic to make the season affordable. This year has brought a new-to-me opportunity in the quest to raise funds – gift cards.  Our local supermarket affords the opportunity for organizations to sell gift cards and receive a percentage of the sales in the form of a donation.

Gift cards seem to be everywhere.  Shopping for the holidays?  Restaurants reel you in with "buy-$100-and-get-$20-Free deals."  Looking to get a discount on your cost at the fuel pump? Get more perks by buying gift cards.  Every restaurant, supermarket and sporting goods outlet is in on the action and wants more. Why?  Well, for starters, sales of gift cards have risen from $80 billion six years ago to $118 billion this year, a 47% increase.  Big dollars.  Two-thirds of Americans have purchased a gift card.  That number rises to 98% for teenagers who have either purchased or received a gift card.

Gift cards are not exactly the most imaginative gift in the world, but they are easy to give and even easier re-gift. The plastic has been the most requested item on holiday wish lists since 2007, and that doesn’t seem to be changing anytime soon.

So, great – we know that gift cards are splendid for birthday gifts.  And now little Benny and his hockey team are sporting some nicer uniforms courtesy of the local market, while dad is chock full of perks for fuel.  But, why the big hurry for all of these companies to sell gift cards?  First of all, companies benefit from the more than $1 billion on gift cards that goes unredeemed annually.  An estimated 40% of card holders do not use the entire value of the card.

Lawmakers have made the rules more favorable for the consumer to be able to hold on to these assets.  The Credit Card Accountability, Responsibility and Disclosure Act of 2009 rules that cards should not expire until at least five years after they are issued, or after the date they are loaded with money. To be sure, those rules have certainly given new life to gift cards left in the wallet.  In 2007, 10% of gift card sales were estimated to have gone unredeemed versus 1% this year.   The extra time helps, but doesn’t account for gift cards that are lost or simply forgotten.

In addition to the unredeemed cards leaving cash in the pockets of the card-issuing companies, retailers also benefit from consumer tendencies with gift cards.  Most gift card holders require more than one trip to the store in order to redeem the entire amount of the card.  And, more than half of gift card holders spend more than the amount of their gift card, with a majority spending at least 60% more than the value of their card.  That means that for the most commonly purchased gift card amount of $25, the company ends up earning revenue of $40 more often than not.

So, go ahead and help your local youth hockey team by purchasing a gift card from them.  Just be sure that you understand what you’re getting into and use those cards as soon as possible!

© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

 This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

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© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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