Gift cards have become the go-to gift for millions of people. They seem like the perfect present because they’re so easy. You don’t have to put a modicum of thought into the gift, and generally, a gift card is well received. Many people are happy to get them. Unless, of course, they get stuck holding cards from retailers or restaurants who file for bankruptcy—either full dissolution or reorganization—before they get a chance to redeem that gift card.
With worsening economic conditions, consumers should think twice about retailer-issued gift cards. Store-issued cards are not as good a deal as you'd think because of the danger of bankruptcy and/or some other court-approved reorganization.
Never forget this: Gift cards are not the same as cash. When you buy a gift card, you are purchasing store credit at that retailer. You may know something about store credit if you ever tried to return something only to have your refund denied for some technicality. Instead, the clerk offers you store credit in the same amount as a refund should have been.
That’s exactly what a gift card is—store credit that can be used only at the store identified on that card.
Retailer bankruptcy filings over the past couple of years have left holders of millions of dollars in gift cards with no way to spend that store credit. Some bankrupt retailers have in the past obtained court approval to continue honoring their cards, but that is extremely rare.
When Sharper Image filed for bankruptcy reorganization in 2008, immediately the courts decided the retailer would no longer accept its cards. An estimated $20 million in gift cards and gift certificates went unredeemed. All these years later, you can still find angry messages in online forums from frustrated people who say they were ripped off and beat up by Sharper Image.
Always keep in mind that if the retailers or restaurants for which you’re hanging on to gift cards files for bankruptcy—which we usually hear about after the fact, not in advance—you may have no way to spend them. Or you may have a short window to make a move. Consider these five ways to use a soon-to-be-bankrupt gift card:
Buy Something
Sure, it may not be enough to buy what you would really enjoy, or it’s a store you are not that fond of. That’s the way it is. Chalk it up to the fact that you got a gift you’re not that crazy about. If the card is for a restaurant, go this weekend to enjoy your gift meal or side dish, as the case may be.
