SEATTLE—Money that would otherwise be found in Americans’ checking and savings accounts continues to pile up in stored value cards.
Case in point: Starbucks, where customers now have some $1.77 billion stored in unredeemed gift cards, up 9% from the previous year, according to the company’s fiscal third-quarter results, MarketWatch reported.
“What’s even better, from Starbucks’ perspective, is that much of that $1.77 billion will never be used, so the only cost to Starbucks was the minimal expense of loading up a plastic card and marketing it,” MarketWatch noted.
Recognizing the Revenue
Last year, the coffee chain recognized what’s called “breakage revenue” of $196.1 million for company-operated stores, along with another $18.9 million in licensed-store revenue. While most of the gift cards it issues don’t expire, Starbucks recognizes this revenue, because the majority of stored-value cards are redeemed within one year, MarketWatch explained.
As a percentage of total gift cards, that was 13.7% — effectively, a negative interest rate on deposits, the report added.