Of the $92 bil­lion spent on gift vouch­ers in the U.S. last year, $6 bil­lion was lost to fees and unused cards. In response to this, the U.S. Credit Card Act now bans fees on vouch­ers that have been dor­mant for less than 12 months and expi­ra­tion dates of less than five years from the date of purchase.

The prob­lem is, accord­ing to research on how we use vouch­ers, this is the oppo­site of what’s needed to pre­vent an increase in the dead­weight loss of gift vouch­ers.

Ryan Sager explains:

While these are intended as pro-consumer reforms, they’re based on a mis­un­der­stand­ing of the real prob­lem with gift cards: You lose money on them not pri­mar­ily because of fees or expi­ra­tion dates, but because you throw them in a drawer and for­get about them. Or, you lose them, or you hold on to them indef­i­nitely — always think­ing you’ll redeem them tomorrow.

It’s coun­ter­in­tu­itive, but the way to make peo­ple more likely to redeem their gift cards would be to shorten the time before they expired.

Sager points to two stud­ies that cor­rob­o­rate this assump­tion: one indi­rectly, show­ing that city res­i­dents are less likely to see ‘the sights’ of that city than tourists with lim­ited time; and another directly, con­ducted on stu­dents with obvi­ously twisted priorities:

64 under­grad­u­ates [were given] coupons for a slice of cake and a bev­er­age at a local French pas­try shop. Half got a cer­tifi­cate that expired in three weeks, half got one that expired in two months. While stu­dents were sure they were more likely to use the cer­tifi­cate with the more gen­er­ous time­frame, the results were clear: The shorter time­frame made the stu­dents much more likely to redeem their cer­tifi­cates; 10 of the 32 stu­dents (31%) redeemed the three-week cer­tifi­cates, only two of the 32 stu­dents (6%) redeemed the two-month certificates.

Long-time read­ers may recall Joel Waldfogel’s research on the inef­fi­cien­cies of Christ­mas gift-giving: a dead­weight loss of 10%, result­ing in a $4 bil­lion loss to the US econ­omy every year.

In that arti­cle, Tim Har­ford sug­gested small and sen­ti­men­tal gifts as ideal, warn­ing against gift vouch­ers as “they have no sen­ti­men­tal value but still cre­ate dead­weight loss, since many expire with­out being used, or are sold at a loss”.

You have been warned.