This community is simply the best!
After yesterday’s Starbucks “0% bond” letter, reader Ron who worked for a large grocery chain had a great response.
So I’m going to paraphrase and try make it easier to understand….
Sometimes, people forget to use or lose their gift cards, and the company has to keep track of all of them.
The government steps in after several years and says, “Hey, if no one’s going to use the cash balance, we’ll take it!”
So the store has to show lots of old records to prove who owns the gift cards.
It’s a big mess, but in the end, the store and the government figure out a fair share.
The States also see this as a large source of funds as part of their Unclaimed Property laws.
They see gift card “breakage” as a pot of money that they can use until the rightful owners of the money come forward to claim it, which is possibly never.
So gift card cash sitting on the companies balance sheet isn’t always able to be used for growth indefinitely.
That’s why it’s best to use your gift cards before you lose or forget about them.
Thanks to Ron and thanks for reading, and be sure to stay tuned for the Sunday portfolio update edition.
~Russ Knopf
