Campuses:

You Probably Have Money Just Lying Around

January 11, 2012

Prof. Joel Waldfogel's opinion piece in the Star Tribune.

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.

Read the rest of the piece in the Star Tribune.

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