You may still be able to get some value for your card if you spend it during this stage. Usually, providers will siphon off cash in "maintenance fees" gradually before an expiration date kicks in and renders your card useless. The expiration date is currently governed by state law, but will be uniformly extended to five years after the CARD Act kicks in.
Escheat and your gift cardOnce the card has expired or fallen legally dormant in the eyes of the state, it becomes part of a turf war between card issuers and states over who gets to keep the unspent balance. This war has intensified in recent years as cash-strapped governments seek to plug budget holes.
Escheat laws are generally written to make sure that money goes to states instead of fattening an issuer's bottom line. Some states, including California, struck deals with issuers to avoid legal wrangling and help consumers at the same time, says Borden.
"The retailers in California, by and large, decided to take expiration dates off of their gift certificates and California agreed that if you didn't have an expiration date on your gift certificates, then they wouldn't escheat the property," says Borden.
If a state does escheat a gift card balance, a consumer currently doesn't stand much chance of getting that money back, says Nebraska Treasurer Shane Osborn, president of the National Association of Unclaimed Property Administrators, because gift cards have no name or address attached to them. Complicating things, says Osborn, is a Supreme Court ruling that escheated property with no address attached so it goes to the state where the issuer is incorporated. Because the rightful owner is unlikely to hail from the escheating state, officials in that state have little incentive to try to return the money.
"We encourage the large gift-card issuers to take a name and a ZIP code, at least, when they're selling a gift card," says Osborn. "If that gift card comes to the point where it will be escheated, then that money will be turned over to that state, and that state can actually go out and find the owner."
State treasuries may not end up getting the last laugh, however. Retailers have recently begun evading escheat by creating dummy corporations to issue their gift cards and headquartering them in states that have escheat laws favorable to retailers, says Patrick Carter, the director of revenue for Delaware.
In the end, there's no reason to let your gift card dollars become part of this perpetual game of cat and mouse. Using your card within a month after getting it is the best way to ensure that your gift card dollars end up buying something nice for you, not the retailer's stockholders or out-of-state bureaucrats.