Gift
Cards and Retailers in Trouble
Before you decide to buy a gift card, you need to know
what to look out for. If the retailer that issued the
card files for bankruptcy or goes out of business, the
person you gave the card to may get caught up in red tape.
Here are some things you need to know to help you make
sure retailers and issuers don’t cash in at your
expense.
It
used to be that consumers only worried about hidden fees
and charges that could wipe out the value of a gift card,
but with today’s economy there’s more you need
to consider! A common question is what happens to your
gift card if a retailer files for bankruptcy protection
–does it suddenly become worthless? The answer is
“it depends.” If the bankruptcy court gives
the retailer permission to continue accepting gift cards,
you may be all right. But if the retailer doesn’t
ask the court for permission or the court says “no”
then gift card holders have to get in line with all the
retailer’s other creditors. If you have a gift card
and the retailer goes bankrupt you can file a legal document
called a “proof of claim” with the court –
including whatever information you have about the value
of the card as well as a photocopy of it. Bankruptcy allows
for the payment of claims depending on what assets the
company still has available. But the reality is –
filing a claim with the court over a $50 gift card is
something most people don’t have the time to do.
There
is a lot of confusion as to gift cards being insured by
the FDIC. Cards issued from an FDIC insured institution
can be insured the same as bank deposits, but in the case
where a retail store or chain goes bankrupt or out of
business and the funds weren’t put into a special
account – the FDIC isn’t going to pay out on
the retailer’s gift cards. .
So
what’s the best thing to do? Ideally, give cash.
If you don’t want to give cash, consider gift cards
or debit cards from the major credit card companies. American
Express, MasterCard, Visa and Discover all offer gift
cards that can be used just about everywhere, so you do
not need to worry if a specific retailer is about to “go
under.” But remember, this type of gift card usually
has more restrictions than gift cards issued by individual
retailers. You have to watch out for expiration dates,
monthly service fees and other fees. State laws may offer
some protection, but usually not as much as you would
think.
Do
your homework before you buy a gift card. Don’t buy
a gift card from a retailer or financial institution that
is having problems. Do a Google search of the issuer’s
name and include words like “financial trouble.”
Also – if you do buy a gift card, make sure you hand
over a copy of the terms and conditions on the card as
well as your receipt to the person you give the gift card
to.
If
you have received a gift card, don’t hold on to it.
Spend the whole thing as soon as possible! The longer
you wait to use a gift card the greater the chance it
will be lost or stolen or forgotten – and of course
the more likely it is the card will loose value due to
time lapsing, fees and the possibility of the retailer
having financial troubles. Sometimes it makes sense to
register a gift card if the option is available to you.
Make sure you keep any information you have on the terms
and conditions of the card. And if the person who gave
it to you doesn’t provide that information –
look on the card for a website you can access which will
tell you what you need to know.
If
you have a gift card and the issuer of the card gets into
financial trouble but hasn’t yet filed bankruptcy
or closed their doors, you should redeem the card or any
balance left right away. If it’s a gift card for
a retailer that has closed its local stores, go to the
retailer’s website and see if you can redeem your
gift card online. If the retailer stops accepting gift
cards or closes local stores and they won’t let you
redeem gift cards online, check with your state’s
Attorney General’s office. They might be able to
help. Also, if the gift card was bought with a credit
card, the person who bought the card might be able to
obtain a chargeback from his or her credit-card company.
If
all else fails and its not worth your while to file a
legal claim, you can try the competition and see if they
will cut you a deal. For example, Brookstone gave a one-time
25% discount to people who brought in their Sharper Image
gift cards and certificates, regardless of the original
value. Good solution to a bad situation. In these tough
economic times, consumers and retailers alike have to
be careful and creative.
Copyright
2008 - Law Office of Gina M. Ghioldi, P.C.
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