There's a laundry card sitting in a client's wallet right now with two cents on it.
No one has ever mentioned a balance that small to us. But it's doing something, and I've spent the past few months trying to understand exactly what.
The quarter finished the transaction
For most of our industry's history, the transaction had a clean simple ending. A client fed quarters into a machine, the machine ran, and both sides were done. Nothing was owed in either direction. The client's money and our service settled on the spot.
The card changed the shape of that exchange in a way we rarely talk about. When a client loads $20 at the kiosk, they haven't bought laundry. They've deposited money with us against future laundry. Accountants have a name for what that balance is on our side of the ledger, a liability. We're holding the client's money until they use it.
Behavioral economists have a name for what happens on the client's side. Richard Thaler called it mental accounting, people sort money into separate mental accounts with different spending rules, and money moves between those accounts less freely than economics says it should.¹ Drazen Prelec and George Loewenstein mapped the part that matters most here. People prefer to pay before they consume, because prepayment separates the pain of paying from the pleasure of the thing itself.² The $20 hurts once, at the kiosk. Every wash after that feels close to free, because the money already left the checking account in the client's head the day it went onto the card.
While the pain-of-paying research has a more mixed replication record than its popularity suggests, and some recent work questions whether the effect has weakened as digital payment became ordinary, the core finding on prepayment has held up across decades of study.³ I'd rather flag that straightforwardly than build on it quietly.
So the card does two things at once. On our books, it's an open balance owed to the client. In the client's mind, it's money already spent. The law and the ledger say the transaction is unfinished. The psychology says it ended at the kiosk.
That gap is where everything else in this piece lives.
What the industries that measure it found
Our industry didn't invent stored value. We adopted an instrument that other industries have been running at massive scale for decades, and those industries publish what it does.
Starbucks is the cleanest case, because SEC filings leave nothing to interpretation. Money loaded onto Starbucks cards/app sits as deferred revenue until it's spent. Some of it is never spent. In fiscal 2024, the company recognized $187.6 million in breakage revenue from unredeemed stored value at company-operated stores, and another $20 million through licensed stores. Over $200 million in a single year,⁴ and it carries no cost of goods.
The pattern isn't unique to coffee. A 2023 Bankrate survey found 47% of American adults holding at least one unspent gift card, an average of $187 per person, roughly $23 billion in total.⁵ The director of Mercator Advisory Group's prepaid practice put the unredeemed share of gift card dollars at between 1 and 3 percent.⁶
Transit ran the closest structural cousin to our card, reloadable, necessity spending, and skewed toward lower-income riders, the same profile as our clients, whose median household income runs around $28,000 a year.⁷ When New York's MTA announced the MetroCard's retirement, it noted $40 million in fare value going underutilized every year from weekly and monthly cards alone.⁸ Years earlier, an MTA spokesman had described what happens to expired card value in one sentence, "It gets counted as farebox revenue."⁹
And then there's the document that stopped me. In 2004, a Federal Reserve Bank of Philadelphia discussion paper on prepaid cards described the retained remainder plainly, noting the structure "likely ensures that most people will either spend more than the face value of the card or never use the card's entire value."¹⁰ A Federal Reserve economist, describing the remainder as a predictable feature of the instrument, two decades before many in our industry had installed their first card kiosk.
Every industry that runs stored value at scale measures what the remainder does and reports it. We adopted the same instrument. I've never seen our industry publicly discuss it.
The story we tell about the bonus
What we do discuss, often is the bonus.
Load $20, get $2 free. I've seen $20-get-$5. I've seen escalating tiers that grow with the load size, and I've seen double-your-money offers. The reasoning attached to these structures is always the same, the bonus builds loyalty. The client who loads is a client who returns.
Here's what I noticed when I went looking for the evidence. There isn't any. Not public evidence, anyway. The card platforms and their processors hold the behavioral data, and none of it is published. No study, no benchmark, no industry survey measures whether load bonuses change retention. The practice spread the way most practices spread in our industry, one store saw another store or heard an owner/operating say they’re doing it.
The bonus itself is worth examining for a moment. $2 free on a $20 load is, mathematically, a 9% discount. But it doesn't feel like a discount, and that difference is what makes it work. In mental accounting terms, money received as a gift lands in a looser account than money earned; it gets spent faster and with less scrutiny.¹ The bonus reframes a price cut as a gift. Whether that reframing produces loyalty, nobody has publicly measured.
Meanwhile, the mechanism that does have a paper trail across every comparable industry is the one nobody attached the loyalty story to. The balance. The card in the wallet with money still on it is an open loop, and open loops pull on the client. The remainder that they didn’t reach zero is a reason to come back, a reason to reload, and each reload sets up the next remainder.
The industry conversations credit the bonus. The documented mechanism is the balance.
The courtroom examined it before we did
On March 29, 2022, a Bronx laundromat client named Bertha Greene filed a class action in the Eastern District of New York against Clean Rite Centers and Laundromax New England, two affiliated laundromat chains operating across the Northeast.¹¹
The complaint's central allegation, restated in the eventual settlement agreement's own recitals, was that reload amounts and machine prices were set "such that the Laundry Cards were guaranteed to have a remainder balance," that the non-refundability of those remainders wasn't revealed until after purchase, and that the remainders "functioned as a hidden fee that was not disclosed to users."¹²