Like how does the store or company profit off of a $20 gift card that costs $20?
In: Economics
There are two ways they make money on a gift card.
The first is the same way they profit on any sale – they don’t make any money on selling a $20 gift card itself, but when the money on that card is spent on products in store, they make the same profit on that sale as they would if you paid cash.
They also make a certain profit on gift cards that are not used – if you buy a $20 gift card, the company gets your $20, when you use the card that money goes towards the cost the retailer paid for the products you buy. If you forget to use the gift card, or lose it, the company still has the $20 you gave them for the card in the first place, and now don’t have to pay for the products you buy with it. So for every gift card bought but never used, they gain almost 100% profit (minus the small cost for the card itself and the processing for it).
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