What to Do with Used Gift Cards and Prepaid Cards

What to Do with Used Gift Cards and Prepaid Cards

January 3, 2018         Written By Natalie Rutledge

Gift cards are easy to give, but they are also easy to forget. If the card has a monthly fee or expiration date, these can become costly little pieces of plastic. Even though gift cards take the hassle out of gift shopping, you want to use them wisely. It is important to know the terms of the card you are buying.

Reasons to Keep Used Gift Cards and Prepaid Cards

Just because you have used the money on a card does not mean you should instantly dispose of it. If there is a chance you may receive a refund in the future, you will want to have the card. Most refunds are processed onto the original method of payment, so not having the card could create complications.

You will also want to keep the card if you can reuse it in the future, especially if you have a few dollars left on the card or will want to reload it at a future date. It may seem like a hassle to hold onto a card for a dollar or two, but that is a dollar or two you do not have to spend on your next purchase.

Use Gift Cards Sooner Rather than Later

There is no guarantee that you will be able to redeem the full value of the gift card if the retailer files bankruptcy. Retailers filing for bankruptcy must have court approval to operate gift card programs. Bankruptcy courts consider unused gift card funds as debt and decide whether or not the retailer must pay it. The retailer can choose to petition the court to allow it to continue to honor gift cards. If the retailer does not make the request or the court does not allow it, then the consumer can lose the value of the gift card. After that, the only remaining option is to file a claim as an unsecured creditor to the bankruptcy proceeding.

The best way to use a gift card is to spend it as soon as you receive it because you do not know what is going to happen in the future. Bankruptcy is not the only way that your card could lose its value. After 6-12 months, some retailers charge a monthly fee, which could quickly reduce the value of your gift card. Experts say it is a good idea to spend your card within the first year. If you wait much longer, you may forget about it and later find yourself with an expired card. If your card has expired, take it to the retailer and ask them to issue you a new card–some retailers may do this.

What happens to unused gift cards? They can eventually revert back to the retailers as income. Some states can even claim unused gift cards as abandoned property.

You May Need to Cancel Your Prepaid Card

If you received a prepaid card as a gift, chances are it is not linked to anyone’s name. If, however, you are getting rid of a reloadable prepaid card, you will need to cancel the card before you cut it up. Most reloadable prepaid cards have monthly or yearly fees. If you do not cancel the account, you will accrue fees on a card you no longer have. If the card is in someone else’s name, they will be responsible for those extra fees. Either way, you are much better off calling to cancel the account before you get rid of the physical card.

Turning Gift Cards and Prepaid Cards into Cash

If you do not want the gift card or prepaid card any longer, there are a few ways you can turn it into cash. You could sell the cards to a gift card buyer. Some local pawn shops offer this service, or you could use an online service like Cardpool. You will be charged a fee no matter where you go, but it will come out of the gift card balance. For example, if you have a $50 gift card, you may only receive $35-$40 in cash.

For prepaid cards, you can use an app like Prepaid2Cash to convert prepaid cards into cash. The app requires you to link a bank account to your account and upload a photo of the card for verification. You will be required to take a photo of the gift card so they can verify the amount on the card. When they confirm there is a balance on the card, you will be given an offer for your card. You are not obligated to accept the offer by any means. The percentage of the total balance that they offer can be dependent on the brand that you have the gift card with. If you accept their offer and once everything is processed, the money will be direct deposited to your bank account.

As a third option, you could try selling the card through local classifieds ads or apps like LetGo, OfferUp, Craigslist or Facebook Marketplace. As long as you charge less than the actual value of the card, you may find a buyer. This option may be more of a hassle than it is worth compared to selling it on a website where you will be able to get money for your card without having to find a buyer.

Donating Gift Cards and Prepaid Cards

Have a card you do not want but someone else could use? Consider donating it to a family crisis center, food bank, homeless shelter, veterans center or other organization. Think about who could most benefit from the card and give it to the appropriate party. You could also repurpose the gift card that you received as a gift for someone else. Donating or giving it as a gift is better than letting it go to waste in your drawer at home.

When and How to Dispose of Used Cards

If there is no possible way to reuse your gift card or prepaid card, it is time to get rid of it. Cancel any accounts with ongoing fees, and then cut up the card or shred it. You could also use the card for future projects, like getting the bubbles out of a cell phone screen protector or the ice off your windshield. Make the most of the gift you were given, and then dispose of it when it no longer serves a purpose.

Here are some consumer tips for buying and using a gift card:

  • Use them before they expire. Merchant and bank-issued gift cards must now be good for five years, thanks to the CARD Act provisions. Reloadable cards can expire five years after the money was last added.
  • Research the fees. Some cards charge fees, such as a monthly fee after 12 months of inactivity.
  • If you will not use the card, or would prefer to have the cash, you can resell the card. There are several sites, such as CardCash.com, Raise.com, and GiftCardGranny.com, that serves as a marketplace to buy, sell, or exchange virtual gift cards. Most cards sell at a 5% to 10% discount or you may receive as much as 80%-90% back for selling your gift card. Some cards are worth more than others and the price can vary between sites.
  • There are limitations on where the virtual card can be used. It can not be used at cruise lines, ATMs, or for recurring charges.
  • The “valid thru” date for a gift card is the date through which your physical plastic gift card or eGift card number may be used. This date is required to process transactions at merchants that request an expiration date. Even if the “valid thru” date associated with a card has passed, its available balance remains unchanged and intact. In order to keep making purchases with your available balance after a card’s “valid thru” date has passed, you may have to call customer service.
  • Keep the card number and the four-digit card security code in a safe place. You will need these to check the balance or report it if it was lost or stolen. If your virtual card is stolen, you might receive a replacement with the value equal to the available balance on the card at the time it was stolen.
  • Purchases made with virtual gift cards don’t have the same protections as credit cards. Merchandise purchased with the card is subject to the merchant’s return policies. Purchases made with the virtual gift card are similar to those made with cash. You cannot stop payment or lodge a billing dispute on purchases made with the card. Any problems or disputes you have regarding a purchase should be addressed directly with the merchant.

If you have old gift cards that you know you will not use it is best to get what you can from them and move on. There is not as much risk for identity theft if you throw away a gift card or prepaid card but if you can it would be a good idea to cut them up if there are no more funds available.

The information contained within this article was accurate as of January 3, 2018. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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About Natalie Rutledge

Natalie Rutledge majored in Communications at Mississippi State University. She was in sales for a number of businesses and spent nine years working as a communications advisor to various entities. Natalie can be contacted directly at natalie@lowcards.com