Caution: Are These Retailer’s Holiday Gift Cards Worthless?

According to a national survey by Consumer Reports, 66% of shoppers plan to give holiday gift cards this season. In 2007, shoppers spent an estimated $26.3 billion on gift cards at retailers. But, some experts warn that these gifts could be worthless if the current trend of retail bankruptcies continues.

Photo by: Schu

Why Gift Cards Aren’t the Best Gifts

Consumer Reports calls gift cards “the gift that keeps on taking”. Even if the threat of retail bankruptcies were not hanging over the industry now, CR doesn’t suggest people give gift cards. Even though your intentions are good, you do not know what stores near your Santa Clara apartment will not be in business in 6 months, and the gift cards that you paid cash for, could be worthless.

Another Consumer Reports survey states that 25% of gift card recipients still have not spent their gift cards a year after receiving them. And, most people end up spending more than the value of the card once they get in the store.

What happens to gift cards after bankruptcy?

When The Sharper Image closed its stores and filed bankruptcy, customers were holding $66 million in gift cards they couldn’t use. The courts were petitioned and finally agreed to take the gift cards if people would spend twice the value of the card. When a retailer files bankruptcy, the gift card holder is considered an unsecured creditor in the bankruptcy and therefore the gift cards have no value. When Bombay Co. closed its stores, gift card holders received 25 cents on the dollar.

Photo by: TheTruthAbout…

Stores that are Closing or Scaling Back

Hundreds of retailers have been forced into bankruptcy or scale-backs. Some have filed bankruptcy protection, so beware. Here is a list of some of the major US retailers who have closed some or all of their stores this year.

• Ann Taylor (117)
• Sprint/Nextel (125)
• Ethan Allen (12)
• Dell (140)
• Friedmans (120)
• Pier 1 (25)
• Sigrid Olsen (54)
• Talbots Kids/Mens (78)
• Home Depot (15)
• Eddie Bauer (27)
• GAP (85)
• Footlocker (140)
• Bombay (all 384 stores)
• Disney (84)
• Macys (11)
• JC Penney (scaling back)
• Loews (scaling back)
• Office Depot
• Sharper Image (184)
• Wilson Leather (160)
• Pep Boys (31)
• Pacific Sunwear (154)
• Zales (105)
• Cache (14)
• Lane Bryant (40)
• KB Toys (356)
• Dillards (26)
• Fashion Bug (100)
• CompUSA (all stores)
• Linens ‘N Things
• Mervyn’s (all stores)
• Club Libby Lu (78)

It is important to consider all of these store closings and potential closings when Christmas shopping this year. Keep in mind too that more bankruptcy filings are done in January, than any other month. This will not only affect the value of gift cards, but also returns after Christmas to retailers who are no longer in business. So, be cautious, check the retail gift card policy and make a wise choice in spending your hard earned cash this holiday season. Consumers say that cash is by far the gift of choice and the more practical option this holiday season.

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