$21B in gift card balances go unredeemed annually, and fraud victims can't tell the difference

Americans leave approximately $21 billion in gift card value unredeemed every year -- a figure the industry calls 'breakage.' Retailers book this as pure profit: revenue for goods never delivered. But this massive pool of dormant balances creates a secondary problem -- it masks fraud losses. When a gift card has been drained by a scammer, the issuer's system shows a zero-balance card that was 'redeemed,' which looks identical to a card that was legitimately spent. The victim, meanwhile, assumes they just forgot to use the card or lost it, and never reports the fraud. The FTC acknowledges that gift card fraud is severely underreported. A 2023 survey found 47% of US adults have at least one unused gift card with an average value of $187, so the cultural norm of forgetting about gift cards provides perfect cover for fraud. Retailers have no incentive to investigate or distinguish between breakage (profit) and fraud (liability) because both look like revenue on their books. In 2019 alone, Starbucks reported $140M in breakage revenue, Nordstrom $17M, and Cheesecake Factory $8M. The structural persistence is that breakage is a profit center, and investigating whether some of that breakage is actually fraud would reduce reported profits.