Why businesses love gift cards and gift certificates

$25 gift certificate from Saltaire Restaurant & Terrace, West Vancouver, BC

Six or seven years ago I went to this restaurant with a friend. I ordered a chicken burger and the bun was mouldy. I complained and got a gift certificate in the mail. It went into a drawer and was never used. I discovered the gift certificate today and wondered if the restaurant was still in business.

In 2011, the restaurant closed and my gift certificate is now worthless. (Well, it has been worthless for four years.)

Businesses love gift certificates and gift cards because so much of the value is never redeemed. Between 2008 and 2013, US consumers left over $44 billion in unredeemed value on gift cards with 40% of consumers not spending the total value on the card.

Yes, the accountants have to carry the unredeemed value of the cards on the books as a liability, but it is still cash on hand for the business until redemption happens.

(Source: http://www.giftcardgranny.com/statistics/)