The Pulse: Don't let those gift cards be a gift to retailers or the state

It's been 12 days since Christmas. Go redeem your gift cards!

That's my takeaway after a chat with Brian Riley, a senior research director in the retail banking and cards practice at TowerGroup. He studies the retail industry and calculates that in this new year, $2 billion in gift-card purchases will go unredeemed. Some will be lost. Others misplaced. And some recipients are simply not motivated to shop at certain retailers.

Believe it or not, the $2 billion figure will represent an improvement. Riley calculates that since 2005, $41 billion has gone unredeemed.

It's not that people have gotten better at cleaning out the junk drawer. The improvement is attributable to Title IV of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, which eliminated many junk fees and voided expiration dates on the cards of less than five years from purchase date.

"At the peak in 2007, 10 percent of all dollars loaded did not get used," Riley told me. He said that included $600 million left in kitchen drawers, $2.6 billion in fees (for example, being charged 50 cents just to check the balance on the card), and $3.5 billion in lost value because of expirations.

So where does the money go? The answer depends on a patchwork of state laws.

Recognizing that some retailers have moved unredeemed amounts off their balance sheets and reclaimed the amounts as revenue, certain states (themselves looking for new sources of cash) have seized the value for their general coffers. Riley cites New York and New Jersey as examples of this approach. (The Wall Street Journal reported that in 2008 - the most recent year for which data could be obtained - New York state collected $9.6 million in unredeemed gift cards and returned about $2,150 to the rightful owners.)

That states should reap a windfall when gift recipients leave money on the counter doesn't seem fair. Nor does it seem right that merchants should ring the register without giving up anything of value. Riley agrees.

"From the way I look at it, it's the consumers' money," he said. "The whole nature of gift cards is that you are tendering money to retailers and asking them to hold onto it until you are ready to use it. Just because you haven't used it doesn't mean it's no longer yours."

Now you know why the gift-card kiosks have grown larger each year and become permanent fixtures. They're an enormous profit center.

For guidance in Pennsylvania, the attorney general's website says: