Fate of the unused gift cards/vouchers

Welcome again and again!! Amigos! Stretch your hands for me because I'm going to walk you through an interesting topic in our blog post, Y'all going to find it more intriguing like I did. One of my favourite childhood moments was recharging my parents mobile with a scratch card. The excitement I get when scratching the coating to find out the secret numbers, collecting them were fireworks in my head.

Corporates revamped this idea and incarnated gift cards. The main difference is we pay and get the scratch card for recharging but here we pay and get these gift cards to provide it's service when required. We usually get them from purchasing products through online/direct store. This card is similar to the debit card but validity is diverged. These plastic cash substitutes, have been in the top-notch to American Tourists for almost 13 years!

Gift-cards

Does Buying worth it?

Gift cards are most popular in all areas right from online, direct shopping, streamers, and even grannies buy these cards to gift their grandchildren. But, how many of those literally put in use? And what happens to those unused ones? Drumroll!
We're going to spill the beans to you.
People in U.S spend around $360 billion on gift-cards during 2019 of which $90 billion remain unused. Think about the whole world.

Whenever we purchase a gift-card we have to carefully look out the conditions apply. This may be regarding the amount, validity and the minimum amount to be spent for using the card. For example, you've bought a new LED TV in Amazon and it provides a $50 google play store voucher for purchasing. The conditions were,

• Customer needs to spend a minimum of $100 to use this card.

• validity for the card is about one year.

Here they are making an additional $50 transaction to give you the satisfaction of dispersing the gift for a service of $100 which would be least useful/indispensable service to you. Let me explain the seller point of view,

• They can keep the unused money with them.

• Sellers don't need to invest more in the capital.

• Can obtain new customers.

• Retain existing customers by providing various new schemes.

• A way to regain business.

Remember about the unused gift-cards. There are various reasons that the customer may not use

• Services may not be available at nearby locations.

• Forgot to use the card.

• Missed/lost

• Price differences with competitors

• Couldn't fetch the required product.

There are about two different types of gift cards

• Open loop

• closed loop

Visa, master-card and rupay are considered as open loop wheraes steam, eBay, and shopping sites are considered as closed (they can be spent on a same shop/online store).

Major vendors like Amazon, Starbucks, Walmart and cheesecake factory have nearly 10% unused gift cards. according to fasb they get their cash and deduce their income from the stated government by using breakage revenue.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from contracts with customers, as subsequently amended, which resulted in the most significant revision to the revenue recognition standards that GAAP has ever seen. One significant impact from ASU 2014-09 relates to the recognition of breakage revenue.(source: fasb)

Breakage is defined as any type of service that is unused by a customer that has already been paid in advance.  For example: If a customer buys an $25 gift card and get to use $24 and throws away/got missed, the company would remove the spent value and the remaining of the whole value is referred as breakage. In an effort to keep from having a liability on its books indefinitely, companies typically estimate a breakage amount and recognize this into revenue.

Gift-cards which are going to end between this pandemic are going to be a huge return to the corporates. Fsab should address this issue and take necessary actions and provide remediation to the countries.

We can also sell these validated unused cards online via GameFlip, and Reddit. They provide us around 70-90% of the cash to our bank account.

Recently Amazon India cheated their customers using the one plus8 mobile sale. Pre-book(Paying money in advance to get the product for sure). Instead, what Amazon did was once the user prebooked the phone they provided a gift card which we can later used to buy these phones. They literally scammed all the valuable customers and changed the actual meaning of the prebook.

The gameplay these corporates conduct with these color cards are far too protagonist than the share market. It's invisible and that makes it more danger to deal, which makes it fit to these quotes,

"You have to go out of your way as a conscious shadow to find situation where the protagonists are somewhat helpless and in real danger but with a red dagger."

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