Why do gift cards have an expiry date?

Pach22

I know the T’s & C’s say you have 12 or 24 months from activation of most cards but does anyone know why?
I mean, who ever you got the card from has the Monet so why are they allowed to keep it if it is not spent by a certain time?

eskbanker

The cynical view would be that it's obviously in the retailer's interests to minimise the number that are redeemed, but not difficult to justify from an accounting perspective that carrying liabilities forward indefinitely isn't desirable.

Okell

Why do you think?

This is why I never buy gift cards as presents (at least not for people I like) and never use any sort of voucher.

If you can't think of an imaginative present for someone but want to spend £n on them, give them the £n in cash and not a voucher.

user1977

Accounting, otherwise they’d have to keep an allowance for unredeemed gift vouchers from decades ago, and from an admin point of view they have to keep an account open for every such card (unlike the old days when the storage was the voucher in the customer’s purse).

MyRealNameToo

Pach22 said:

I know the T’s & C’s say you have 12 or 24 months from activation of most cards but does anyone know why?
I mean, who ever you got the card from has the Monet so why are they allowed to keep it if it is not spent by a certain time?

When you buy a £20 gift voucher how much profit have they made?

They've made 0 because whilst they now have 19.90 sitting in their bank account, assuming you paid by card, they also have a £20 liability sitting on their balance sheet. This ignores the card itself isnt free. 

Having a fixed duration makes life simple, you leaving it at £20 until exactly 24 months have passed and then the liability disappears giving you a profit. If you didnt have that you would need to create an accounting principle that gets past auditors to write the liability down over time in the same way invoice assets are written down over time for bad debt. 

If they didnt do this then large companies would have millions of liabilities sitting on their balance sheet that people would be speculating how real/accurate they are. They'd have to have prudence built into the writing down calculations, tested etc... fix a date where they are written off makes life cleaner, simpler and no chance for some auditor or investor to claim that the value is understated. 

Undervalued

MyRealNameToo said:

Pach22 said:

I know the T’s & C’s say you have 12 or 24 months from activation of most cards but does anyone know why?
I mean, who ever you got the card from has the Monet so why are they allowed to keep it if it is not spent by a certain time?

When you buy a £20 gift voucher how much profit have they made?

They've made 0 because whilst they now have 19.90 sitting in their bank account, assuming you paid by card, they also have a £20 liability sitting on their balance sheet. This ignores the card itself isnt free. 

Having a fixed duration makes life simple, you leaving it at £20 until exactly 24 months have passed and then the liability disappears giving you a profit. If you didnt have that you would need to create an accounting principle that gets past auditors to write the liability down over time in the same way invoice assets are written down over time for bad debt. 

If they didnt do this then large companies would have millions of liabilities sitting on their balance sheet that people would be speculating how real/accurate they are. They'd have to have prudence built into the writing down calculations, tested etc... fix a date where they are written off makes life cleaner, simpler and no chance for some auditor or investor to claim that the value is understated. 

eskbanker said:

The cynical view would be that it's obviously in the retailer's interests to minimise the number that are redeemed, but not difficult to justify from an accounting perspective that carrying liabilities forward indefinitely isn't desirable.

Both of these posts are absolutely true!

Many years ago a friend's son, who went onto become a chartered accountant, had related holiday jobs with several large retailers. He was staggered by the percentage of gift cards which were never redeemed. In some cases it was well over a third!

TELLIT01

Years ago there was never an expiry date on gift vouchers.  The change is simply to enably the business to make more profit.

Ectophile

TELLIT01 said:

Years ago there was never an expiry date on gift vouchers.  The change is simply to enably the business to make more profit.

But that's the whole point of a business!

Undervalued

TELLIT01 said:

Years ago there was never an expiry date on gift vouchers.  The change is simply to enably the business to make more profit.

Really.

I am at the wrong end of my sixties and I can remember book tokens etc having an expiry date back in my childhood??

Okell

TELLIT01 said:

Years ago there was never an expiry date on gift vouchers.  The change is simply to enably the business to make more profit.

Undervalued said:

TELLIT01 said:

Years ago there was never an expiry date on gift vouchers.  The change is simply to enably the business to make more profit.

Really.

I am at the wrong end of my sixties and I can remember book tokens etc having an expiry date back in my childhood??

I redeemed some W H Smith gift tokens a couple of years ago that had no expiry date.  The tokens were at least ten if not twenty years old when I used them.

Before using them I checked that they were still valid with a shop assistant and she confirmed that (1) they had no expiry date and (2) that they were still valid.

Andy_L

eskbanker said:

The cynical view would be that it's obviously in the retailer's interests to minimise the number that are redeemed, but not difficult to justify from an accounting perspective that carrying liabilities forward indefinitely isn't desirable.

and they don't have to maintain any supporting IT system with backward compatibility for evermore