Bah, humbug! Consumer lobby concerned about gift card expiry dates

Consumer lobby CHOICE is calling on Australians to give cash not gift cards this Christmas, after their survey revealed many gift card holders don’t spend the full card balance before it expires.

According to the survey, 35% of Australian consumers have lost shopping credit to an expired card.

CHOICE spokesperson Tom Godfrey said prepaid gift cards from Dymocks, Hoyts and Westfield were some of the worst offenders, only offering 12-month expiry dates.

The amount left on a card after it expires is known as ‘breakage’, which becomes instant profit for retailers.

In a 2012 investigation, the Treasury’s Commonwealth Consumer Affairs Advisory Council said average gift card breakage rates were probably lower than CHOICE’s survey suggested, reporting them at 6 or 7%, translating to a consumer loss of $150 million to $175 million per year.

But card producers deny both figures, saying that breakage rates are low.

"It may be true for a very small number of smaller retailers with a small footprint, but generally you wouldn’t expect more than a few per cent of breakage,” said Fergus Koochew, General Manager of GiftE.

"The most popular cards, the Coles and Woolies cards, everyone loves those cards and they are always redeemed."

Koochew also denied CHOICE’s claim that cards are sold to retailers on the basis of the bottom line profit breakage provides.

"I’d be surprised about that, there might be someone out there doing that but generally retailers don’t want breakage, they want people in their store,” he said.

"Merchants want new customers and they want to up-sell to new customers who come in with a gift card."