Is gift card breakage legal to keep?

Unredeemed balances on compliant gift cards generally become revenue over time, but rules on expiry and fees vary by province. Configure your program to follow local law.

How do gift cards improve cash flow?

You collect payment upfront for goods delivered later, and a portion of card value is never redeemed, so the program adds working capital immediately.

Gift Cards & Loyalty

The Breakage Effect: Why Gift Cards Boost Cash Flow Immediately

You get paid before you deliver, and some cards are never fully spent. That's the breakage effect.

Armour Payments Editorial Team•September 16, 2026•1 min read•Reviewed by Armour Payments Product Team

Gift card with partial balance remaining

The short answer

Breakage is the value on gift cards that goes unredeemed. Combined with upfront prepayment, it boosts cash flow immediately: you hold the money before providing goods, and a portion is never claimed. Gift cards effectively give your business an interest-free cash advance.

Cash before delivery

When you sell a gift card, you receive cash now for products or services you deliver later, sometimes much later. That timing alone improves working capital, giving you money to restock, pay staff or invest before you owe anything.

What breakage is

Breakage is the portion of gift card value customers never redeem, a few dollars left on a card, or a card lost in a drawer. Industry-wide it's a meaningful percentage, and it flows straight to your bottom line over time.

The combined effect

Upfront cash plus breakage plus spend uplift (people buy beyond the card value) make gift cards unusually profitable. It's one of the few promotions that improves cash flow the moment you launch it. See gift cards 101.

Stay compliant

Provincial rules govern expiry and fees on gift cards, so configure your program to comply while still benefiting from natural breakage. Armour Payments handles the setup. See pricing or book a demo.