What happens to the billions of dollars loaded onto gift cards that consumers forget to ever spend?

A Gift Card Starts as Cash and an Obligation

When someone buys a gift card, the retailer receives cash but has not yet delivered the merchandise or service. In its books, the retailer generally records a liability: it owes the cardholder the ability to spend the card’s value later. The cash may be used in the meantime, but the obligation remains until the card is redeemed, expires under applicable rules, or is otherwise resolved.

When the card is used, the retailer records a sale and reduces that liability. The plastic or digital code is only a way to track the promise; the money does not sit in a separate envelope waiting for its owner.

Forgotten Balances Become “Breakage”

Some cards are never fully spent. A small remainder may be left after a purchase, or the card may simply be forgotten. Retailers call the portion they expect never to be redeemed breakage.

Accounting rules generally do not let a company count every unspent balance as profit the moment it guesses a card will go unused. If it can reasonably estimate redemption from its own experience, it typically recognizes breakage over time in proportion to customers’ actual spending. If it cannot make a reliable estimate, it generally waits until redemption becomes remote. That treatment reflects the gradual evidence that the retailer will not have to fulfill the remaining promise.

The State Can Have a Claim, Too

An unspent balance is not automatically the retailer’s to keep. State unclaimed-property laws may require certain unused gift-card funds to be turned over to the state—a process called escheatment. The rules vary by jurisdiction and can depend on the card’s terms and who issued it. Some cards or balances are exempt; others may be subject to reporting and remittance requirements.

So the final destination of a forgotten balance depends on more than whether the customer returns. It may become recognized breakage revenue, remain a liability, or be owed to the state. The key twist is that forgetting a card can benefit a retailer only when the law and accounting rules allow that unredeemed promise to be released.