Private Currency Lost in the Sofa

It’s hard to get a handle on all the ways that a private currency operator can profit from his franchise. But one of my favorites is having the loose change slip between the sofa cushions never to be seen again. The accounting rules for these things must be a mess. One of the reasons why the folks that issue gift cards like for them to expire is somewhat like the reason why firms like to make your vacation time expire; otherwise they have to do something to keep it on their books.

So today Home Depot announced it was going to claim 50+ Million Dollars that it’s pretty sure it’s customers have lost in the sofa since they bought them.

The article also reports that $55 Billion dollars moves into the private currency systems call gift cards every year; it doesn’t estimate how much manages to get back out v.s. slip into the sofa. I find that number a bit bewildering; there are 100 million households in the US; or so that’s $550 per household. I presume that the distribution over households is skew’d (since that’s my default presumption for distributions involving exchanges). I can imagine that there are people who build entire houses via gift cards; but still! Most of the gift cards are capped to hold only a maximum of $500; so it must get pretty weird for the high volume gift card users.

But wait. The article then goes on to find an source that thinks that if you take the bank issued gift cards, i.e. Visa/Mastercard gift cards, the annual amount might be up around $100 Billion; at which point we are talking a thousand per household. The bank cards are more fungible so I suspect some of those get shipped over seas; then possible some of the regular gift cards do too?

“spokesman for … Best Buy. ‘We really believe gift cards are all about convenience.'” What he means is, of course, they is very very convienient for Best Buy.

0 thoughts on “Private Currency Lost in the Sofa

  1. Ben HYde

    Yeah. What your seeing there is a hint about the margins on gift cards. The retailers that sell gift cards don’t pay face value for them and coinstar’s usual 8-9% fee is smaller than the discount the retailers purchase the card for.

    Coinstar’s niche opened up when the US banks became obnoxious and stopped letting people convert coins to paper currency for free. I presume that they had to get the US treasure to change some banking regulation before they dropped that service; but who knows.

    Thanks for the pointer.

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