Gift cards are a common holiday gift, but the Better Business Bureau warns that if consumers are not careful, their gift cards could be worthless in a few months.
With the downturn of the economy many stores are struggling. Though they may be operating through December, some businesses could close locations or file for Chapter 11 bankruptcy in the future.
If a store is no longer located in your area in the future the gift card can be useless or a huge inconvenience to the gift card holder, especially if the card cannot be redeemed online. If a business ends up filing Chapter 11 bankruptcy, gift cards are treated as a loan to the company, not as cash. Some businesses that file for bankruptcy may still honor gift cards but others will have no choice but to stop redeeming them.
The Houston Chronicle reports that when Sharper Image filed bankruptcy and then closed earlier this year, between $20 million and $40 million in gift cards were not redeemed.
The Better Business Bureau advises the following when considering purchasing a gift card:
Check out the business at www.bbb.org. If the Better Business Bureau is aware of any government actions, already-filed bankruptcy or licensing problems it will be listed in the reliability report.
Check out the business with the Federal Trade Commission.
Ask if the gift card can be redeemed online. This way if the store location nearby closes the holder can still purchase items online.
Ask if the gift card has an expiration date.
Research the business. Customers can sometimes find news articles about businesses planning to close stores or file bankruptcy. Keep in mind, not everything on the internet is true so make sure the Web site is a credible source.
There are gift cards redeemable at multiple locations and usually sold by retailers, banks and major credit card companies. However, the businesses selling these cards should still be researched using the above suggestions. Consumers should also be aware that there is usually an additional purchasing fee for the person buying these gift cards and that these cards usually have an expiration date varying between six months and two years. Before buying the gift card ask if there are any location limitations for those using the card.