Gift cards have become the go-to gift for millions of people. They might seem like the perfect present because they're so easy to purchase. You don't have to put the tiniest bit of thought into this type of gift, and a gift card is generally well-received, unless, of course, they get stuck with cards from retailers or restaurants that end up filing for bankruptcy before they get a chance to redeem them.
Millions of consumers with gift cards to American Apparel, RadioShack, Wet Seal, Sports Authority, The Sharper Image, Brookstone and other brands on the growing list of recently bankrupted or financially ailing businesses need to pay attention to what follows.
Even though I am not a fan of gifts cards, in the past I have suggested that if you buy one, you should choose a card issued by a retailer — not one issued by a bank — because retailer gift cards are generally free of expiration dates, annoying fees and other gotcha's.
Consumers should think twice about retailer-issued gift cards. Store-issued cards are not as good a deal as you'd think during these hard economic times 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. You may know something about store credit if you've ever tried to return something for a full refund only to be offered store credit in the amount you wanted refunded. Unlike a refund, store credit can only be used at that same store.
Retailer bankruptcy filings over the past couple of years have left millions of dollars in gift cards in peoples' hands with no way to spend the credit. Some bankrupt retailers have obtained court approval to continue accepting gift cards, but that's rare.
When The Sharper Image filed for bankruptcy reorganization in 2008, an estimated $20 million in gift cards and gift certificates were unredeemed and, at that point, were no longer acceptable. Even now, all these years later, you can still find angry messages in online forums from frustrated people who say they were ripped off by The Sharper Image.
Always keep in mind that if that retailer or restaurant files for bankruptcy — which we usually hear about after the fact — you may have no way to spend your credit.
GIFT CARD GIVERS: Rather than making gift cards your gift of choice, start purchasing authentic gifts for your friends and relatives. If you cannot bring yourself to break the gift-card habit, at least make sure it's for a store or restaurant that is not on the brink of ruin.
GIFT CARD RECIPIENTS: Check your stash. If you have cards for retailers who are filing for bankruptcy protection, find out if that card is still valid. If it is, run — don't walk — to that store and spend the credit. Sure, the credit may not be enough to buy what you really want, or it may be credit to a store you aren't that fond of. But 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, plan to go this weekend and enjoy a meal.
When it comes to gift cards, the message is clear: It's time for all of us to adopt a use-it-or-lose-it attitude.
Mary invites questions, comments and tips at [email protected], or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Debt-Proof Living," released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.