Gift cards have always been popular gifts when you don’t know exactly what that perfect present is. And with Mother’s Day, graduations, and Father’s Day all within the foreseeable future, consumers will surely be purchasing those plastic cards when they can’t find that perfect item.
But with retailers filing bankruptcy because they aren’t strong enough to survive the recession, unused gift cards are becoming worthless pieces of plastic.
“I am less likely to buy a gift card because of this,” said Bryan Lew, a junior at Stony Brook University. “My family received a Sharper Image gift card and faced a similar situation.”
Last year when the Sharper Image filed for chapter 11 bankruptcy, they stopped accepting their gift cards only to later accept them as a 50 percent off coupon. Eventually when they announced they were closing all their locations in May 2008, they stopped accepting the gift cards altogether.
There are some remedies for gift card holders when the retailer goes out of business. They have the right to file a claim with the bankruptcy court as a creditor to attempt to get their money back. However, they are usually on the bottom of a large list of creditors and may never see a dime of their money.
If they get lucky a competitor store may have some sort of deal to allow you to get some use out of the gift card. For example, when KB Toys went out of business earlier this year, Toys ‘R’ Us was offering 15 percent off of any one toy item with a KB Toys gift card between January 12 to January 31 — all you had to do was surrender the card.
Courtney DeMarco, a former employee of KB Toys, recalls customer frustration to their unusable gift cards. “They were very disappointed and they did want their money back,” DeMarco said. “They were angry with the fact that they could not use their gift cards because the business was going out of business.”
According to the Tower Group, a research firm, they “expect consumers to become more sensitive to the potential risk of failures in the retail industry that expose private label gift cards to value loss in the event of bankruptcy,” states a late 2008 press release. “The sensitivity to this issue heightened in 2008 following the bankruptcies of Linens ‘N’ Things and Sharper Image, where more than $100 million in gift card value became compromised in the wake of retailer filings.”
“I have never bought a gift card myself,” says Josefina Felix, a senior. “As soon as I get one as a gift, I try to spend it as soon as possible. One reason [being the fear of bankruptcy] and the other one because I tend to forget how much money left I have in the gift card.”
