Hello and welcome back to Mortgage Advisor on FIRE. This week I discuss gift cards, and how we are all acting as lenders to the companies that offer them. Also, just when you thought the US could not get any crazier…
Weekly Update
We’re starting to get back to normal now the new year is out of the way. We didn’t do much for NYE, and hardly anything on January 1st. All in all, a pretty quiet start to the year. On the 2nd we completed our first bike ride of 2026, with a 36km journey that took us to Rotherham and along the river towards Doncaster. We turned back and explored a little around Rotherham we’ve not seen before (there’s not much to see) before heading back along the canal to Sheffield.
We would have stayed out longer but for the fact it was absolutely freezing and we always feel bad leaving Poppy on her own.
I’m surprised at how much I’ve been enjoying biking since we started going together. Although it’s still enjoyable in the cold, I can’t wait for the warmer weather when we can cycle in shorts and a shirt, rather than multiple layers.
If Russia Did This, We’d Be Screaming
Let’s be very clear up front, because clarity matters: the situation around Venezuela is chaotic, heavily disputed, and wrapped in a fog of claims, counter-claims, and presidential bombast. What matters for this piece isn’t whether every dramatic statement survives scrutiny. What matters is that the President of the United States is publicly talking as if military force, regime removal, and custodial authority over another country’s leadership are not just thinkable, but reasonable. This alone should make people deeply uncomfortable.
If Vladimir Putin stood at a podium tomorrow and announced that Russian forces had struck Ukraine, seized its president, and that Russia would now “run things for a bit” to ensure stability, the West would be incandescent. Emergency UN sessions. Wall-to-wall coverage. Sanctions within hours. Op-eds screaming about sovereignty, international law, and the post-war global order.
Yet when similar language, intent, and posture come from the White House, especially when filtered through Donald Trump, the reaction is strangely muted, fragmented, or hedged with “well, he didn’t really mean it” qualifiers. Which is precisely the problem.
Let’s strip this back. Russia’s invasion of Ukraine is condemned not only because of the scale of violence, but because of the underlying logic: that a powerful state can use military force to reshape another country’s leadership, borders, or political future. That sovereignty is conditional. That might makes right. That “we know better” is a sufficient justification for tanks and missiles. Those are the norms we are supposed to oppose.
Now look at the rhetoric coming out of Washington. Claims of strikes. Claims of custody. Claims of oversight. Claims of economic involvement, particularly around oil, framed as stabilisation rather than control. Even if some of this collapses under verification, the direction of travel is unmistakable. This is regime-change language. This is imperial muscle-memory resurfacing. And it is being delivered with the casual confidence of someone who assumes America’s motives will always be treated as inherently different. They aren’t.
Russia justified its actions in Ukraine with security concerns, criminal accusations, and moral narratives about saving people from bad leadership. The United States is doing what it always does: insisting its actions are exceptional, necessary, and benevolent, even when they mirror the very behaviour it condemns elsewhere.
And this is where the double standard becomes impossible to ignore. International law doesn’t say “no invasions unless you’re the good guys”. Sovereignty doesn’t mean “hands off, unless we find you annoying, corrupt, or strategically inconvenient”. Either these principles apply universally, or they’re just branding.
What makes this moment especially unsettling is the messenger. Just when you think American politics can’t get any more unhinged, Trump steps forward like a man saying “hold my cognitive test results”. Or, more charitably, like someone who slept through the briefing and woke up mid-sentence convinced he’d understood it.
This isn’t careful diplomacy. It’s vibes-based foreign policy. Big, declarative statements delivered without visible concern for legal process, global reaction, or long-term consequences. It’s the same impulsive bravado that characterised his first term, only now pointed at a far more fragile global order.
And fragility matters. Because once the world accepts that powerful countries can openly discuss capturing foreign leaders, administering other states “temporarily”, and leveraging military force for economic involvement, without consequence, the rules stop being rules. They become suggestions.
That’s exactly the world Russia wants. It’s exactly the world China is watching. And it’s exactly the world smaller nations fear.
You don’t defend international norms by breaking them more politely. You don’t preserve order by insisting your violations are special. And you don’t get to condemn Moscow on Monday for behaviour you flirt with on Tuesday.
If the US wants to be taken seriously when it talks about Ukraine, democracy, and the rule of law, it needs to act like those words mean something even when it’s inconvenient. Especially then.
Because the most dangerous precedents aren’t set by declared enemies. They’re set by allies who assume the rules don’t apply to them.
And history has a habit of remembering that hypocrisy far longer than any press conference.
What I’m Doing
Listening: Callsign: King – Chess Team Book 3.5: by Jeremy Robinson and Sean Ellis.
Watching: Pluribus (Apple TV).
Reading: nothing at the moment.
Financial Update
Assets
Premium Bonds: £23,000.00.
Stocks and Shares ISA: £127,344.11.
Fuck It Fund: £1.61.
Pensions: £111,413.72.
Residential Property Value: £243,430.00.
Total Assets: £505,189.44.
Debts
Residential Mortgage: £174,692.83.
Total Debts: £174,692.83.
Total Wealth: £330,496.61.
Gift Cards
You can’t move in a supermarket in December without being herded, gently but firmly past gift cards. They’re everywhere: checkouts, end caps, special freestanding displays wrapped in just enough tinsel to pass as festive rather than transactional. They’re sold as thoughtful, flexible, and safe. The perfect answer to indecision. The solution for when time, energy, or emotional bandwidth has run out. But gift cards aren’t really gifts at all. They’re financial instruments dressed up as generosity, and once you start pulling at that thread, the whole thing unravels very quickly.
When you buy a gift card, the company does not record it as a sale. That’s the first tell. Accounting rules require it to be logged as deferred revenue; a liability. On paper, the business hasn’t earned anything yet because it still owes someone goods or services in the future. That framing is meant to feel reassuring. Look, it’s not profit yet. Look, they still owe you something. But this is where the sleight of hand begins, because while the revenue is “deferred”, the cash is not. The money is real, immediate, and fully usable. It goes straight into the general pot, indistinguishable from any other pound the business takes in. It pays wages. It pays rent. It plugs gaps. It props up cash flow at the exact moment retailers need it most.
December is not an accident. Gift cards peak at the end of the financial year for many retailers, when balance sheets matter, liquidity matters, and optics matter. Gift cards inflate cash reserves without triggering the costs normally associated with sales. No stock has to move. No staff time is consumed. No logistics chain is stressed. It’s cash in, obligation postponed. And that obligation may never even materialise, which brings us neatly to the part nobody advertises: breakage.
Breakage is the industry’s polite euphemism for people forgetting, losing, or abandoning gift cards. A non-trivial percentage is never redeemed. Others are partially used and then quietly abandoned with a few pounds left on them, too small to feel worth the effort but large enough to add up at scale. Over time, accounting rules allow that unused balance to be recognised as income. Not revenue earned through effort or value creation, just money that expired, evaporated, or slipped through the cracks. No cost of goods. No delivery. No labour. Pure margin. This isn’t a bug in the system. It’s a feature.
And even when gift cards are used, they still behave exactly how the business wants them to. They lock spending into a single retailer before the customer has made any meaningful decision. There’s no comparison shopping once the card is bought. No walking away. You’re anchored. Psychologically committed. And more often than not, the card doesn’t quite cover what you want, so you top it up. The initial “gift” becomes a down payment on further spending. Choice narrows. Spend increases. Mission accomplished.
Then there’s expiry, which is where the justifications start sounding thin. In the UK, gift cards can expire, but only if it’s clearly stated and considered reasonable. That’s why many large retailers now offer long expiry periods or claim not to expire at all. This isn’t corporate benevolence. It’s regulatory pressure and reputational risk management. Expiry-based breakage looks bad. It feels bad. And it attracts the kind of attention companies would rather avoid. Still, expiry exists for a reason: unredeemed gift cards are liabilities that sit on the balance sheet indefinitely, cluttering things up. From a corporate perspective, they’re unresolved promises. From a consumer perspective, they’re money already spent.
Next time you think about buying a gift card that has an expiry date on it, ask “why”? Why is an expiry date necessary?
And if you think, “at least it’s safe”, that’s where the illusion fully collapses. If a company goes under, gift card holders are usually unsecured creditors. Which means you’re right at the back of the queue, hoping there’s something left after everyone more important has been paid. There usually isn’t. The business got your money when it was alive. If it dies before you’ve redeemed the card, that loss is entirely yours. The risk doesn’t sit evenly. It never has.
Seen through a cash-flow or FI lens, gift cards are brutally one-sided. They’re interest-free loans from consumers to companies, with zero upside and full downside. You get no return for the time your money is tied up. No flexibility if circumstances change. No protection if the business fails. If you sit on a £200 gift card for a year, that’s £200 that could’ve earned interest, reduced debt, or been invested. Instead, it’s quietly improving someone else’s liquidity while you hold the risk.
None of this means gift cards should never be used. Free money from an employer? Take it. A genuine discount with immediate plans to spend? Fine. A small, low-stakes gift where the alternative is something worse? Sure. But the idea that gift cards are neutral, harmless, or somehow generous by default doesn’t survive even mild scrutiny.
They are a financing tool. A cash-flow lever. A risk transfer mechanism. They exist because they work spectacularly well for businesses. Especially when times are tight, margins are thin, and certainty matters more than anything else.
So the next time you’re corralled past a wall of glossy plastic rectangles promising “the perfect gift”, it’s worth pausing for half a second and asking who they’re really perfect for. Because once you strip away the festive language and the convenience framing, what’s left isn’t generosity at all.
It’s just a very polite way of lending money to a corporation and hoping nothing goes wrong before you get to spend it.
Finally, from an environmental point of view, physical gift cards are pure bullshit. Egift cards are at least virtual, so there’s no plastic waste when they’re used up.
Starbucks
There’s a reason Starbucks is such an important case study in all of this, because they’ve taken the basic gift card model and quietly evolved it into something far more sophisticated: a pseudo-banking system, hiding in plain sight behind flat whites and loyalty stars.
Starbucks doesn’t just sell coffee. It holds deposits. Millions of customers, myself included, load money onto the Starbucks app in advance. Not because they’re asked to think of it as a deposit, as that would feel weird, but because it’s framed as convenience, speed, rewards, frictionless living. Tap once, earn stars, skip the queue. But strip away the gloss and what’s actually happening is brutally simple. Customers are transferring cash to Starbucks before any product is provided. Starbucks gets the money immediately. The obligation to deliver coffee comes later. If I top up my balance, I don’t just do it for the cost of one coffee. It’s normally in £20 increments. It can easily be another month or so before I top it up again
Sound familiar? It should. It’s the same mechanism as a gift card, just industrialised.
At any given time, Starbucks is sitting on vast sums of customer-loaded balances. If you aggregated those balances and looked at them the way you’d look at bank deposits, Starbucks would rank as one of the largest “banks” in the world by stored consumer funds. The difference is that a bank is regulated, capitalised, insured, and required to protect depositors. Starbucks is not. There’s no FSCS protection for your cappuccino float. No interest paid. No guarantees beyond “trust us”.
And yet the money behaves exactly like deposits. Starbucks gets cash now, in bulk, at scale. They can use it to support operations, manage liquidity, reduce reliance on external financing, and invest in the business. The consumer gets… faster checkout and the vague promise of a free drink at some point in the future. It is, once again, an interest-free loan, provided voluntarily, repeatedly, and enthusiastically by customers.
What makes this model especially powerful, and especially uncomfortable, is how effectively it’s normalised. Nobody feels like they’re lending Starbucks money. They feel like they’re being savvy. Efficient. Rewarded. The language matters. “Top up” sounds harmless. “Load your balance” sounds responsible. “Earn stars” sounds like a game. But economically, the consumer is fronting capital while Starbucks captures the time value of money.
And just like gift cards, the risk is asymmetrical. If Starbucks vanished tomorrow, those app balances would instantly become unsecured claims on a collapsed company. Unlikely, perhaps, but the point isn’t probability, it’s structure. The structure places the downside with the consumer and the upside with the corporation. Always has. Always will.
Zooming out, this is the logical endpoint of what gift cards started. Retailers realised years ago that prepayment is gold. Starbucks simply perfected it. They wrapped it in behavioural design, gamification, habit formation, and a daily ritual people don’t question. Coffee isn’t a once-a-year Christmas purchase. It’s a near-daily transaction. That makes the float enormous, stable, and predictable. From a corporate finance perspective, it’s borderline genius.
From a consumer finance perspective, it’s quietly extractive because every pound sitting in that app is a pound not earning interest, not reducing debt, not invested, not liquid in any meaningful sense. It’s capital that’s been handed over in exchange for convenience and dopamine hits from loyalty points. Again, that doesn’t make it evil. But it does make it non-neutral.
When you put Starbucks next to gift cards, the pattern becomes impossible to ignore. This isn’t about coffee. Or plastic cards. Or Christmas convenience. It’s about companies discovering that consumers will willingly act as lenders if you remove the language of finance and replace it with branding, rewards, and ease.
The money flows one way. The risk flows the other way. Once you see it, it becomes hard not to notice how many modern “convenience” systems are just variations on the same theme. Prepay now. Consume later. Forget in between if possible. The business wins either way.
So yes, Starbucks has built a pseudo-bank. One funded by its customers. Paying no interest. Offering no protection. Delivering value only when, and if, the customer comes back to claim what they’ve already paid for.
All in all, this is a very impressive strategy. Some businesses make money when they sell their product. Making money before the product is sold is efficient and elegant.
The thing is, I’m not entirely opposed to gift cards or topping up balances. It’s all about finding an edge where you can, and entering into these transactions with your eyes open. For example, if you want to budget for your monthly coffee, you can just top the balance up once a month. On a relatively small balance, say £50, you’ll earn hardly anything on that. The peace of mind that comes with budgeting can be a small reduction in cognitive load. Another example is something that Oana and I have started doing. We are able to buy egift cards for our supermarket at a 4.5% discount as a benefit through her employer. Granted, the supermarket gets our cash up front for the month, but we also get a not-insignificant discount.
The bottom line is this, and it shouldn’t come as a surprise to regular readers, money and finance is all a game. If you learn the rules, you have a much better chance of winning.
DISCLAIMER
The views and opinions in this blog are my own, and do not represent the views or opinions of my former, current, or future employers, nor should they be considered advice.
If you want personalised financial advice, seek an appropriate professional. If you are in financial difficulty, seek advice via the resources below:
Biolink
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bio.link/davidscothern.