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?
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Gift Cards, bahhh humbug. Yews I understand that a gift card is a bit better to the giver and receiver when it comes to gift giving. However the dangers of fake gift cards, lost gift cards, companies going out of business simply does not justify them.
@Tom B — I agree, especially with regards to lost or forgotten gift cards — either you have to (a) not lose them and remember you have them when you are ready to make a purchase or (b) make a purchase earlier than you really intended to…. neither are really good situations.
I got several gift cards over the holidays, and I’m nervous I’m going to neglect to use them!