November 06, 2008


As the holidays approach, the topic of gift cards seems to always come up ... Despite the naysayers, people in general seem to love gift cards. Last year, gift cards were the second most popular gift to give (According to December 2007 issue of Consumer Reports Money Advisor); listed as the number one gift women wanted to receive (number three on the list for men). A Get Rich Slowly blog post outlines a growing concern of people and gift cards - what to do when stores go broke.

An AP article from earlier this year estimates that over $75 million in gift cards are at risk of becoming worthless pieces of plastic this year [from store and restaurant closings]. Kwame Kuadey, the author of, a blog about gift cards, offers helpful suggestions if you find yourself in such a predicament:

- Get on the phone. Call the nearest store to find out if they are still accepting gift cards. Some, like Linens 'n Things, can continue to redeem gift cards by petitioning the bankruptcy court.

- If they are accepting, use immediately. They may not redeem for full value (i.e., Sharper Image customers that received 50% of value), but something is better than nothing. If they are not accepting gift cards, you can hope for:

- Competition. Do a google search to find out if competitors are running special promotions targeting gift card holders of the bankrupt company. For example, when Bennigans went out of business, Texas Roadhouse offered a promotion where holders of Bennigan's gift cards could exchange them for a free entree certificate that was good for any item on their menu. It is not an uncommon strategy to try to 'lure' new customers.

- Take them to court. Obviously you are low on the totem pole (essentially treated as an unsecured creditor) in the courts eyes. While odds are slim, it is your right [to take them to court].

- Go to the government. This would be a good strategy if the gift cards held are from local, small businesses. In this instance, contact your State Attorney General. Recently in St. Louis, a local spa (Spa 151) went out of business leaving several hundred gift card holders with worthless gift cards. More than 300 consumers filed complaints with the Attorney Generals office. The Missouri AG was able to get the former spa owners to pay over $100,000 to redeem the cards and certificates.

- The best offense. The last piece of advice offered is to be proactive. You don't need to be a financial analyst to know if a company is struggling. Store closings and layoffs are clear signs of a company that is having issues. The example he shared was Circuit City - a company that has shed thousands of employees, hundreds of stores, and has a stock price today of 26 cents.

- Gift Card Buy Back
- Gift Card Tips & Tricks
- Gift Certificates & Gift Cards
- Pros & Cons of Gift Cards