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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