What To Do with Gift Cards for Out-of-Business Stores?

Gift cards have quickly become one of the most popular holiday gifts because people can use them to get whatever they want from a certain store. In fact, despite the economic downturn, nearly two-thirds of consumers plan to buy at least one this holiday season, and 55 percent wouldn’t mind receiving one. But what happens to gift cards when the store they’re valid for goes out of business?

Unfortunately, most gift cards to defunct retail outlets instantly become worth as much as the barcode-embossed plastic they’re printed on. In 2008, customer backlash occurred over the closing of Sharper Image stores and the thousands of gift cards still out in circulation. Retail bankruptcies are expected to rise in 2009, and because many people hold onto gift cards for some time before using them, many could become worthless.

Laws in some areas prohibit businesses who have announced their closure to continue to sell gift cards after a certain date. For smaller stores that go bankrupt, gift-card holders are considered unsecured creditors in the eyes of many bankruptcy courts, which means the card holders are not necessarily entitled to get their money back.

Source:
USA Today: You’d better watch out: Gift cards can be lumps of coal

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