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You probably have money just lying around

  • Article by: JOEL WALDFOGEL
  • December 21, 2011 - 9:53 PM

You'd be rightly skeptical of an ad describing "billions of dollars in buried treasure in your own back yard!" But -- and you heard it here first -- there are billions of dollars worth of treasure buried in your own back yard.

It's not mislaid government gold reserves or Cold War plutonium deposits.

No, it's unredeemed gift card balances, buried in your kitchen, under two years of junk mail and bill envelopes. And in your kids' bedrooms, stuffed in a drawer that day they "cleaned up" suspiciously fast.

Other people choosing stuff for you is a recipe for disaster, or least dissatisfaction. Based on years of research, I've concluded that each December's $65 billion in holiday spending produces a $15 billion satisfaction shortfall in the United States.

That is, recipients value the items they receive as gifts that much less compared with things they would buy for themselves. Around the world, giving destroys $25 billion per year.

One natural solution to all this is gift cards, which in theory give the recipient the ability to choose which sweater or DVD or slingshot he or she actually wants. But there's a catch: About 10 percent of gift card balances are never redeemed, resulting in -- you guessed it -- buried treasure.

After coming out of nowhere about 15 years ago, gift cards have grown to enormous heights in sales. Retailers have issued at least a third of a trillion dollars in gift cards that never expire.

Yet, about a tenth of these balances have never been redeemed. Cards are misplaced or forgotten under the couch, or amid the junk mail.

What happens to all this lost booty? When you buy a $100 gift card, the retailer puts the money in escrow and doesn't "recognize" the revenue until you redeem the card.

A few years into the gift card revolution, these unredeemed escrows ballooned. Retailers figured out that balances not redeemed after three years were likely never to be redeemed.

So a few years ago, they began quietly "recognizing" the unredeemed balances. The gift card you bought Lenny -- and that Lenny lost under his car seat -- became a gift to the retailer's shareholders.

Retailers will sell another $80 billion worth of gift cards this year, with a disproportionate chunk around the holidays. And, sadly, the buried treasure will grow by perhaps $8 billion.

If you're a gift giver -- or a disorganized gift recipient -- this is a bad situation, and we need to do something about it. I have some solutions.

First, before your next trip to the mall, hold a scavenger hunt for your missing cards. Second, designate a gift card storage area. How about the battery drawer, so you can keep them with other things that are "charged up"?

Third, start keeping track of card balances. Put each gift card in a small envelope, and write, "Billy's card" and the card balance on the envelope. Each time you use the card, update the balance on the envelope.

Beyond these simple steps, it would be nice if your gift cards had various transformative powers -- if Aunt Hattie's gift card from the Candle Outlet could magically become, say, an Amazon gift card.

Also, it would be fantastic if your unused gift card balances could find their way to charitable causes rather than to retailers' shareholders.

Some of my wishes have come true with Tango Card -- which, full disclosure here, is a firm that I advise. First, users can register their gift cards (from Target, the Gap, Starbucks and a number of other retailers) at Tango Card's website and receive reminder e-mails with their remaining balances.

Or keep track of balances with an iPhone app. This is the high-tech answer to the envelope ledger and periodic peeks in the battery drawer.

Tango has also issued its own gift card -- the Tango Card -- with some chameleonlike powers. Recipients can transform it into a gift card at any of 13 participating retailers, including Target, the Gap, Williams-Sonoma and others.

Unspent Tango Card balances can be donated to any of nine charities, including the Grameen Foundation, Habitat for Humanity and the National Park Foundation.

Finally, if you can't think of something to buy at the retailers -- and you don't feel like sharing with one of the charities -- you can redeem the Tango Card balance for cash, less a service fee.

None of this would be necessary if we weren't disorganized knuckleheads who lose track of our cards. But we are. And it wouldn't be necessary if we didn't have major hangups about giving and receiving crisp currency as gifts.

But we do. And it wouldn't be necessary if we were better at choosing stuff for our recipients. But we're not.

So, gift cards are the solution we've chosen. As a result, there's a growing pile of treasure in our own houses, if only we can stop burying it.

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Joel Waldfogel is the Frederick R. Kappel Chair in Applied Economics at the University of Minnesota's Carlson School of Management and is the author of "Scroogenomics."

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