Lesson: Banks Use Multiple Routing Numbers

Lesson: Banks Use Multiple Routing Numbers Photo by mrbill

Here is a tip that I was just reminded of the hard way: don’t make assumptions about check routing numbers, as the routing numbers for many banks vary by region.

I recently opened a new checking account with Chase online; the account was setup instantly, with the actual written materials to follow shortly. For reasons that we don’t need to go in to, I set up the account with more initial money than I intend to keep in that account, and so I quickly moved to link the account with my other banks so that I could transfer money around electronically.

In order to link accounts — for anything ranging from online transfers to payroll direct deposit — you need to provide the checking account number and the routing number for the bank. The routing number is a nine digit number assigned to the bank that is used to route transfers, and is located in the bottom left of the checks printed by your bank.

Here’s where I made my mistake — I assumed the routing number on my new checking account would be the same as the other two Chase checking accounts I have. I didn’t know this for sure, as the routing number was not included in the information I was provided online, but it seemed like a reasonable assumption.

Wrong. Within two days, Paypal and Citibank had rejected my attempt to link the accounts online to my new Chase account, telling me the account information was wrong. It didn’t take me long to figure out the mistake was the routing number.

The reason for the different routing numbes? I had opened the other checking accounts in a different state than this one, and, at least with Chase, the routing number is based on the region that corresponds to where the account was opened. See this lovely table of Chase routing numbers.

The worst part is that I attempted to make an online credit card payment using the wrong routing number, which was then rejected by Chase, causing me a whole lot of headache with my credit card company over the rejected payment — but I’ll save that story for next time.

I don’t pretend to understand why the system works this way, but it sure is frustrating. One of the benefits of a national bank like Bank of America or Chase is that they are “national” — I can deposit my money anywhere in the country, make transactions, etc.  The fact that the routing number varies by the region the account was opened seems like an archaic holdover.

On their question and answer page on routing numbers, Bank of America’s answer to “What state should I select if I opened up my account online or by mail?” advises customers to contact customer service. That in itself makes this all seem like a silly and complicated system.

Presumably there are not two accounts with the same number in the system, so in this day of electronic banking, why could Chase not accept the transactions using any one of their routing numbers? Can anyone enlighten me more?

Anyway, word to the wise — don’t make assumptions about the routing number?

April 7, 2009 • Filed Under Banking • Leave a Comment 

Problems With My Citi Card, Part One – Dealing With Fraud

Problems With My Citi Card, Part One – Dealing With Fraud Photo by brycej

I have had a rocky month in my relationship with Citibank’s credit card division, driven by two separate issues. Neither was initially their fault — one problem is the result of my own stupid mistake, while the first problem deals with unauthorized charges on my credit card — but both problems were exasperated by frustrating customer service interactions.  This may just be a string of bad luck, but the last month has left me rather annoyed with Citibank. 

Unauthorized Charges: I don’t remember that…

This all started a few weeks ago when I was reviewing my spending activity on my Citi PremierPass Elite card, something I try to do every few days. While most of the charges looked normal, two charges caught my eye:

  • One charge on 3/2 at a department store for $200
  • One charge on 3/3 at a baby store online for $30

I have only used this card for one purpose — travel spending — and so these charges immediately stood out. Furthermore, I would certainly remember spending $200 at a department store, and (thankfully) have no reason to be spending money at a baby store. Despite the fact the card was still  in my possession, I had been hit with fraud. 

Credit Card Fraud Protection

I was not particularly concerned about the unauthorized charges, though, as federal law offers significant protection against credit card fraud. The FTC maintains a comprehensive website that provides a great deal of information on credit card rights, but their page on avoiding credit card fraud keeps it simple: “By law, once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event, your maximum liability under federal law is $50 per card.”

Citibank even takes it a step beyond federal law, though, promising on my card that I can: ”Shop anywhere and never lose a penny on unauthorized charges. With $0 Liability you won’t pay for any unauthorized charges made on your Citi credit card.”

Citibank Customer Service

So when I noticed the fraudulent charges, despite the fact that it was after midnight on a weekend, my immediate move was to contact the 24-hour service line on the back of my card.  I expected this to be a simple call: cancel and reissue the card, dispute the fraudulent charge. Didn’t turn out that simple, though.

First problem — there was a clear language barrier between the customer service agent and myself; English was clearly not his first language. Without discussing the merits of outsourcing and international call centers, I have found that patience can usually work around these problems. This call, though, was particularly challenging.

Pardon Me?

Rather than allow me to begin the process of disputing the charge, he told me that I needed to contact the merchant first. My reaction was essentially, “pardon me?” He wanted me to contact the two companies and ask them why they were charging my card. I can’t for the life of my figure out what calling them was going to accomplish for me. It is not like the department store is going to refund me the money based on my word — there is an established procedure for dealing with this, and that is through the charge dispute process. Furthermore, it is not my job to follow up on fraud charges — that is what Citibank is here for.

The more ridiculous part of the conversation came when I pointed out that there had been two charges at two separate companies on two separate days — that it looked like someone had my credit card information andthat my card was compromised.

“Compromised” must be a buzz word they train on, as he immediately asked me to hold on for a moment, and came back essentially telling me that he had checked the  information on his end, and that the card had not been compromised. I have no idea what he checked, but apparently it reassured him that I had nothing to worry about. When I tried rephrasing my request, he kept saying that everything was fine and the “he didn’t understand my concern.”

This went on for a while, and I began to  sense this conversation was not going to accomplish what I wanted it to. I was rather annoyed that Citibank seemed to be placing so much of the burden for dealing with this on me.

Customer Service, Take Two

I tried calling customer service again on Monday during normal business hours and got a much more helpful agent, who immediately noted the disputed charges and offered to cancel and reissue me the card without being prompted. She told me that they would mail me the forms necessary to officially dispute the charge, and that I should receive my new card in a few days. Strangely, she also recommended that I try contacting the merchants, for reasons that are still entirely unclear to me.

So I figured what the heck, I’ll try contacting the merchants. The call was about as pointless as I expected it to be — the customer service agent at the department store was confused with what to do with me, and first sent me to the dispute department for their own credit card. Eventually I reached a very nice man who apologized for the inconvenience and promised to block future orders from the card. However, he said I still needed to dispute the charge with my credit card company (duh).  I suppose my call helped the department store out (marginally), but it seemed like something my credit card company should have been doing instead of me.

Process Moves Forward

The rest of the process has been pretty straightforward, if not excruciatingly slow:

  • Citi got the new card and dispute form to me within a matter of days
  • I filled out the form and mailed it back to Citibank
  • After about two and a half weeks, I received a temporary credit to my account while they “investigate.”

Hopefully, this is the last I will hear of this matter. Fraud happens — it is an unfortunate reality — and it is an inconvenience in itself, given that I was initially out the money until Citi provided a temporary credit and I also had to deal with changing the credit card number at various merchants.

Customer service can be critical in these experiences, though, and Citibank unfortunately just made the experience more frustrating — the two calls left me feeling like I was running in circles.

I would love to hear about anyone else’s experiences — feel free to leave a comment or shoot me an email.

March 31, 2009 • Filed Under Credit Cards, frustrating experiences • Leave a Comment 

Festival of Frugality #166 – The Winter Is Almost Over Edition

Welcome to the 166th edition of the Festival of Frugality — The Winter is Almost Over Edition. Taking a break from the love related themes from the last two festivals, this week we bid farewell to the month of February and look anxiously towards the spring that is only a few weeks away. If you live in a northern climate, I’m sure you understand where I am coming from. Spring could not come soon enough.


spring1
Photo by Nicholas_T (Flickr)

Editor’s Choice

Frugal Tips


spring3

Photo by noahg. (Flickr)

Frugal Shopping


spring4
Photo by stpauliesgirl. (Flickr)

Frugal Philosophy

Frugal Reuse, Recycling, and Resale


spring2
Photo by spisharam (Flickr)

Frugal Finances

That’s all, folks!

Thanks for sticking around until the end. To learn more about the Festival of Frugality, head over to the carnival website. Next week’s Festival of Frugality will be hosted over at Green Panda Treehouse. Should be fun!

February 24, 2009 • Filed Under Spending Wisely • 31 Comments 

Hello Everybody: I’m Back!

Hello Everybody: I’m Back! Photo by Justin Marty (Flickr)

Well, I am officially back to blogging. What started as a simple break from posting over the Christmas holidays inadvertently turned into a much more lengthy break from regular blogging than I had intended. It turned out to be much harder to start back up than I had planned. 

Nevertheless, I am committed to continuing this blog both as a way for me to continue exploring personal finance and frugality issues, as well as a way to share what I have learned with others. If anything, the month off gave me a chance to decide if I really wanted to continue to work on the blog — and the answer is a definite yes. 

Festival of Frugality

To start things off, I will be hosting the 166th (and as-of-yet unnamed) Festival of Frugality next week. I really enjoyed hosting the Festival last time around, and am looking forward to being able to share some great entries from around the frugality community. If you’re interested in submitting a post for the festival, as usual, head over to the carnival page.

Stay Tuned

In addition, I have some ambitious plans for the blog over the next couple of months, including more frequent posting, regular features, a new blog theme, and more. I would love to hear any feedback you might have for me on where I can go from here, so please don’t be shy. 

So please stick around!

February 16, 2009 • Filed Under StudentScrooge.com • 3 Comments 

Some Random Thoughts After A Trip To The Mall…

Some Random Thoughts After A Trip To The Mall… Photo by Paul Keleher

A few years ago, whenever I needed to pick up clothes and other general items, I would invariably find myself at my local shopping mall. Of course, the internet has now all but taken over that role, and so I rarely find a need to drive out to the mall. Today, however, was an exception, as I found myself at the mall due to a last minute need by a family member.

It was interesting to spend some time in there. Just some quick thoughts I had on the way back from the mall:

  1. Holiday shopping is an overwhelming experience. First, there were just a ton of people at the mall — both in terms of the number of cars in the parking lot, but also in terms of the number of people inside. Once you get past issue of crowds, you have to combat the marketing campaigns all over the mall that are trying to induce you to spending more money. The holiday season must be when stores are at their best when it comes to wielding the power of marketing, advertising, and social pressures — you really need to mentally prepare yourself for the overload of a trip to the mall.
  2. Everybody seems to be having a sale - Seems the trend from Black Friday continues — retailes are taking deep price cuts to try to drive up sales. 
  3. Aggressive sales people – Maybe I’ve just been away from mall shopping for too long, but I was surprised the extent to which some employees were aggressively seeking sales. Some were more chatty than usual, others were aggressively giving “sales pitches”, some continuously checked if you needed help, and some offered large amounts of unsolicited advice. I found this all to be tremendously annoying, but I suppose that it is just part of the reality for small business owners during these though economic times.
  4. Horton at Macy’s — Horton was everywhere. By “Horton” I mean the Horton Plush Toy from the Dr. Suess book “Horton Hears a Who”, and by “everywhere” I mean the Macy’s in my mall.  They literally had flooded their store with Horton Plush Toys — you can see one here  – which could be found behind every counter (whether it be the cosmetics department or the children’s department), next to the exits, along the escalator, on wall shelves, and more. There were so many of them that I started to wonder how they got there — it looked like you could have filled a truck with the number of Horton plush toys this Macy’s had. It must be a huge marketing campaign. That being said, at $15, they were not a bad deal.
  5. Stores going out of business – As opposed to Horton, this is not nearly as happy an observation — I was saddened by the number of stores that were going out of business in my mall. It was just a tad depressing walking along the store fronts; most of the handful of stores going out of business were independent “mom and pop” type places, many of which had been in this mall for quite some time. Certainly a sign of bad economic times. It is hard to imagine what the mall is going to look like mid-way in to 2009 if this continues; will we lose any major anchor tenants? 
  6. Something nice about the holiday experience in the mall – Yes, this seems to contradict number 1, but hear me out. While it is true that there are lots of people, cars, aggressive marketing, and more, all told, the mall during the holidays seems to be a happy place. All of the holiday decorations, seasonal music, Santa’s workshops, and more, work to create a very festive and jolly atmosphere. Of course, the cynic in me rightly points out that is surely all a ploy to get shoppers to spend more money in the name of the “holiday spirit,” but it does do a good job of setting the mood. Furthermore, given the emphasis on gift giving during the holiday, there is something nice and appropriate about shopping for gifts amongst other people who are doing the same thing — it fosters a sense of holiday community that I think you just don’t get when you buy everything on the internet.
Have you been to a mall during this holiday shopping season, or are you sticking to the internet? What were your observations?

December 1, 2008 • Filed Under Saving Wisely • 4 Comments 

6 Situations Where I (Surprisingly) Don’t Need Cash

6 Situations Where I (Surprisingly) Don’t Need Cash Photo by zbowling

While there are certainly still many places where cash comes in handy, I have been surprised recently at the number of unusual places where I have been able to use my credit card. It seems like you can’t escape the Visa or MasterCard logo these days — at least that was my experience during my Thanksgiving travels. So what places surprised me by accepting credit cards?

1. At The Vending Machine

For some reason, this surprised me last month when I saw it in a hotel — yes, just like this picture shows, some vending machines are now accepting credit cards. I wonder what the economics of it all are — if the convenience store next door has a $5.00 minimum charge, how come this vending machine is willing to charge a $2.00 Coca-Cola? All-in-all, I can’t really complain; when you’re thirsty, it stinks to have a dollar bill that the machine just will not accept. One more of life’s little frustrations eradicated!

2. Onboard The Airplane

Even at 30,000 feet, it is hard to escape the domain of the credit card. Many, if not most, major airlines now accept credit cards for in-flight purchases of things like snacks, drinks, and other items. In fact, some airlines are even going so far as to go completely cashless  – no credit card, no cocktail. Given that airlines are charging more and more money for more and more amenities (no free drink on US Airways? Really?), these credit card terminals are going to find quite a bit of use.

3. At The Drive Thru

Maybe it is just because I remember the “old days” when it used to take a little bit of time for a credit card authorization to go through, but it still seems strange to me that you can use your credit card in most fast food drive-thrus. Many are making it even easier by installing outside terminals where you can swipe your card yourself. 

4. In The Back Of A Cab

Am I the only who ever gets (irrationally) nervous in a cab ride that you might not have enough cash? There is just something about the variable factors that go into a cab ride which can make me nervous. What if you get stuck in traffic? What if you don’t really have a grasp of how far you are going? So the fact that more and more cabs are now accepting credit cards is a very welcome development in my book. The only problem, in my experience, is that some cabbies are still very much in opposition to the idea, so sometimes they will give you minor pushback at first. Small price to pay.

5. Buying Mass Transit Cards

I have been in a couple major cities in the last few weeks, and several of them had mass transit systems that allowed you to load almost any amount — no matter how small — on to a “pay as you go” transit card using your credit card. In Boston, for example, I found myself constantly charging $2.00 to add another ride on to my pass (since it was a short trip, why risk buying more than I need?). Of course, some cities like New York de-incentivize this by offering bonuses for putting on more money at one time (which seems like a fair system).

6. Opening A Bank Account

i just find this one funny. When I opened a checking account earlier this year, I was given the option of initially funding the account via credit card — up to $500 (free credit card rewards!). Now, I am extremely responsible with my credit cards, but does anyone else think that funding a bank account with a credit card might be a bad idea?

What Does It All Mean?

So credit card machines are everywhere now — that much seems apparent. I imagine it is a combination of decreased transaction costs coupled with a recognition that people simply spend more money when they use credit cards.

Is this a good thing? It certainly makes life more convenient. At the same time, it also adds to the temptation to spend more, which for some people is hard to resist (That $10 sandwich on US Airways or American seems a lot more acceptable when you pay via credit card).

One major concern of mine with all of this, though, is security and accountability. When you use a credit card in a store, you can be reasonably confidant of its legitimacy and you know where to come back to if there are any problems. With all of these mobile credit card machines, though, whether it be on a plane or a cab, it seems like it might be harder to maintain that accountability.

Furthermore, this proliferation of credit card machines just raises the stakes when it comes to fraud — take a look at these pictures of credit card skimmers that Redbox found. Now look at the vending machine in this post’s picture — one’s legit, and one isn’t, but it’s not easy to tell. I worry that with these credit card machines everywhere, people will become complacent and simply accept them, rather than remain vigilant for fraud.

Regardless, it’s pretty amazing where you can use credit cards these days. What unusual or surprising places have you used a credit card recently?

November 29, 2008 • Filed Under Everyday Strategies • Leave a Comment 

Amtrak: Woops, Missed My Train

Amtrak: Woops, Missed My Train Photo by jpmueller99

… and it was no big deal. What a refreshing experience.

I was supposed to take a morning train on Amtrak’s New England corridor (the one that runs up from DC through New York to Boston) for a quick trip last week. I’ll spare the sad details, but I was running very late last week, and ended up arriving at the train station just in time to see my train pull away.

If I were traveling on an airline, I would be in trouble. Changing an airline ticket these days can set you back upwards of $150 plus change in fare; missing a flight outright can lose the ticket’s entire value. Not exactly consumer friendly.

Amtrak, however, was an entirely different story. Since I had not yet picked up my ticket, I could refund the ticket entirely, despite the fact the train had already left; the only cost associated with getting on the next train was that I had to pay the difference in cost. Effectively, they refunded my ticket and bought me a new one on the next train.  A $20 difference.

Comfortable Options

Traveling on Amtrak’s New England Corridor really is a comfortable experience. Consider:

  • The trains on the New England corridor all have power outlets on the window, meaning you can simply plug your laptop in and remain charged. 
  • The seats also feel a bit more comfortable than your normal airplane seat
  • The food in the cafe train isn’t that bad.
  • No airport security, no hectic crowds, no assigned seating

Honestly, the only major advantage that air travel has is the speed. All-in-all, a pleasant trip.

November 25, 2008 • Filed Under Travel • Leave a Comment 

The Frugal Court #1: Netflix

The Frugal Court #1: Netflix Photo by Marit & Toomas Hinnosaar

Welcome to the first entry in my “Frugal Court” series, looking at the frugality of various products and services. Up this week is Netflix, the popular video-rental-by-mail service with the iconic red envelope. I have been a subscriber for the last year under the $8.99 plan, which offers unlimited one-at-a-time DVDs. Should I continue subscribing?

The Frugal Indictment 

The charge against Netflix is simple — that, for most people, unless you are watching large numbers of movies each month, it is simply not worth the monthly rental fee. Even if you watched every movie as soon as you received it, you can not hope to get much more than four movies a month. The best case scenario, then, brings about a per-movie cost of around $2.25.

I, however, have not come close to getting the most cost-effective return from my membership — it sometimes takes me quite a while to watch a movie. I am not going to embarrass myself by stating the longest amount of time I have held on to a Netflix DVD, but suffice it to say that I kept “Lost, Season 1, Disc 1″ for a while.

So that brings about the first question: How many movies am I watching under the Netflix plan? Does it justify the monthly cost? If i am only watching one movie a month, there are probably better options. In my personal case, I am watching maybe three movies a month, which puts Netflix in a very gray area. 

The second question, however, I think often gets overlooked — Am I watching more movies than I really otherwise would want? Just as how people with Costco or Sam’s Club memberships often buy more than they otherwise would, you can’t simply look at Netflix as a good deal if you end up watching more movies than you would if you didn’t have the Netflix membership. Are you falling victim to “Netflix-guilt” – the pressure to watch a disc quickly so you can get a new one sent out? I know I have.

The Frugal Alternatives

Of course, one of the most important considerations in The Frugal Court is where the service stands in relation to other alternatives. While it would be easy to say that movies are a luxury that can be done without, that doesn’t seem like a very fun option. What alternatives to Netflix exist? 

One possibility is Redbox, the human-less DVD kiosk service that allows you to rent DVDs for $1. It has a decent selection — largely popular newer titles –and it is hard to beat the $1 price. Unfortunately, there is not a convenient Redbox kiosk near my location. If there were, I might have to seriously consider Redbox. The best part about Redbox is that there are frequently coupon codes out there that will get you a free rental. 

Another possibility is the local library. While this varies by library, many now offer DVD rentals for free (or for a nominal charge). My local library, for example, charges a dollar or two and has an ever-growing collection of movies. This, too, is a pretty good option, and definitely worth checking out.

Finally, the internet provides a growing number of alternatives. Sites like Hulu have large amounts of television episodes, and some movies, online for free, while online stores like Amazon.com and Apple iTunes let you “virtually rent” movies for a few dollars. If you are only renting one or two movies a month, this might not be a bad alternative.

The Frugal Defense

I’ll be honest. For some reason, I have always loved Netflix, and can’t really imagine giving up my subscription, even if I am not making the most of it. Crazy, right? Their customer service is top-notch — no email or form responses; they immediately put you through to helpful and proactive customer service representatives. I have always been a satisfied customer, and it seems like that should count for something.

Furthermore, I think there is something to be said for how hassle-free Netflix makes watching movies. It is always easy to get a movie within a few days, no driving to the video store or kiosk required.

They also have a great recommendation system, which has done an amazing job suggesting new movies for me. The added surprise of new recommendations has made movie watching more fun (for more information on Netflix’s impressive recommendation system, check out this article from a recent New York Times magazine). 

One of the most exciting parts of Netflix recently, however, has to be the On-Demand feature, which allows you to watch selected television shows and movies on your computer streamed instantly under your membership. I was thoroughly unimpressed when it first came out, but the technology and selection have both improved dramatically. Netflix really seems to be pushing this, as they have recently announced partnerships with X-Box, TiVo, Starz, and more, to expand the reach and features of their on-demand service. 

My Personal Verdict

Last week, I was all set to cancel my Netflix subscription and try out alternative ways of getting movies for a while. But then I saw my first episode of the wickedly-funny television show 30 Rock; I was hooked instantly and wanted more. Guess what? Netflix’s On-Demand service had every episode that was out on DVD available for instant streaming. Thanks to Netflix, I was able to watch two seasons of 30 Rock without leaving home. 

Since then I have poked around the online features some more, and I am curious to see how it develops, as it seems like it has quite a bit of promise. So I have decided to stick around for a few more months and see if I make use of all of this. 

Any of you use Netflix? Have you found it worthwhile, or have you left for greener pastures?

November 23, 2008 • Filed Under frugal court • 17 Comments 

Bookmarked: Carnivals and Links – Nov 20

Only one more week until (American) Thanksgiving! I’m looking forward to returning home and enjoying time with family — and most importantly, taking time to take a break and relax a bit. Much overdo. 

Site Issues

If you tried to visit Student Scrooge on Tuesday or Wednesday this week, you may have noticed the site was either down or returning errors — unfortunately my web host was experiencing problems with their database server, which knocked my site offline intermittently for the past forty-eight hours. I’m hopeful that things have been resolved, but I’m not entirely positive of that. Nevertheless, I appreciate your patience!

Around The Blogosphere

Recent Carnivals

Bargain Briana presented the 114th Festival of Frugality — Election Day Edition, and I was honored to have my gift card expiration “crisis” chosen as an editor’s choice! Awesome.

The Sun’s Financial Diary hosted the 177th Carnival of Personal Finance, which included my post on tipping for take-out food.

MoneyNing hosted the 179th Carnival of Personal Finance – Smile Edition, which should perhaps be described as the happiest carnival in a while. My post “6 situations where I still need cash” was included. 

Finally, Financial Wellness Project put together the Festival of Frugality #152 – Affected By Recession Edition, which included my list of great websites for scoring cheap airfare.

Thanks to all the hosts for putting in the time!

November 20, 2008 • Filed Under Bookmarked • Leave a Comment 

So are gift cards a bad idea now?

So are gift cards a bad idea now? Photo by The Consumerist

Yikes. It has not been a good week to be a gift card. It seems like there are media reports and stories all over the place concerning the dangers of gift card usage. Should you avoid gift cards?

Revisiting the Sharper Image Gift Card Mess

Last spring, when the Sharper Image filed for bankruptcy, many of us got a rude awakening — Sharper Image stopped accepting their more than $40 million outstanding gift cards, making them essentially worthless. Eventually, after some bad press, Sharper Image adjusted their policy, but the episode was a red flag when it comes to gift cards — Sharper Image was really one of the first major retailers to go bust in the “modern gift card world” , and one of the first to threaten to nullify a large number of gift cards in bankruptcy.

Will Your Gift Card’s Company Still Be There?

All of these concerns came back to the forefront again when the ubiquitous Circuit City filed for bankruptcy recently (note: Circuit City announced that they will continue to accept gift cards while in bankruptcy reorganization). The news about Circuit City surprised me — even though I knew it had been doing struggling, to hear of such a major chain falling apart is a little disquieting. It seems like every day we are hearing news about more and more major American companies struggling to survive this economy (General Motors, anyone?)

If you get a retail store gift card, will the store still be there when you go to use the card? In this economy, many experts are saying it simply is not worth the risk.

The Chicago Tribune ran a story recently called “Gift cards tagged with doubt” that tackled this issue, noting that:

If you buy a gift card from a retailer that goes bankrupt, it’s uncertain when, or if, it can be redeemed, experts say… In the case of Circuit City, the company sought and received permission in bankruptcy court to honor its outstanding gift cards, a spokesman said. But such petitions are optional. If the retailer doesn’t ask or the judge rejects the request, gift-card holders have to file a claim in bankruptcy court and get in line behind all the other people the company owes.

Now, in my opinion, that article seems a bit alarmist — we’re hopefully not going to see many major retailers collapse. But at the same time, I can see that it is probably a good idea to avoid at-risk companies, such as the perpetually-plagued airlines.

More Risks

Of course, this is all on top of the traditional criticisms of gift cards — mainly that they are loaded with fees, expiration dates, limitations, etc that make them difficult to use. This is a reoccurring topic for consumer advocacy groups like Consumer Reports, so I will point to their work rather than rehash it here. Suffice it to say, this is definitely a win-win situation for retailers — that Consumer Reports article mentions a statistic that unused, lost, or expired gift cards amount to over $8 billion dollars in 2006. That is crazy!

And it will only get worse — that Tribune article mentioned that the National Retail Federation believes that shoppers plan on purchasing around four gift cards this holiday season, spending around $150 total. I had no idea gift cards had become that popular of a gift.

So What Do You Do?

If you are the gift-receiver, the answer seems easy: use your gift cards quickly. I am terrible at this, but I am beginning to appreciate the importance of burning rather than saving gift cards. I think I may make an effort next week to start keeping better track of the gift cards I currently have and make a better go at working through them.

If you are the gift-giver, on the other hand, setting aside the obvious suggestion that you actually buy personal gifts rather than generic gift cards, what should you do?

  • Retail gift cards carry risk. While they are going to have less fees and expiration dates, and may be easier to use, you run the risk that the company may go bankrupt or disappear.
  • Those Visa or MasterCard Gift Cards are even worse. I really dislike these cards. These things are annoying to use, have more fees, and are not covered by most state gift card laws.

And that seems to bring us back to an old gift option…

Cash




Image by AComment

Cash. Is cash really that bad of a gift? It is no less personal than a gift card, but gives you just as much (if not more) flexibility, does not expire, no fees, and is pretty darn safe. Seems like a good situation to me.

So what are you doing this holiday season?

November 19, 2008 • Filed Under Everyday Strategies • 3 Comments 

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