Gift cards and store closings

[Mitchell Andrus]

Just a quick holiday shopper's heads-up.

Many large chains are closing stores after the holidays. Therefore it can be assumed that many gift cards will be tough to use locally if at all.

If you must give gift cards, buy them from a local mall so they may be used at any store.


http://www.marketwatch.com/news/stor...F515E91A746%7D


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Tens of millions of dollars in gift cards and certificates became worthless overnight in the wake of the Sharper Image's financial plight -- and customers holding those cards have little recourse.

Federal law allows a company to stop honoring store gift cards when it files Chapter 11 bankruptcy, and that's exactly what's happening at San Francisco-based Sharper Image. Sales clerks are telling customers they can no longer accept the plastic cards as payment, and the cards are no longer accepted when customers try to use them online.

[Randal Stevenson]

I was discussing this with someone yesterday and neither of us are lawyers, and know the answer.

But it seems weird to me, that while a person can't go out and charge a bunch of jewelry and then file bankruptcy the next day and discharge the debt, companies get away with selling gift cards/certificates, up until the day they file bankruptcy.

[Ben Rafael]

I was discussing this with someone yesterday and neither of us are lawyers, and know the answer.

But it seems weird to me, that while a person can't go out and charge a bunch of jewelry and then file bankruptcy the next day and discharge the debt, companies get away with selling gift cards/certificates, up until the day they file bankruptcy.

That's called fraud.

[Roger Ronas]

Laws are setup for big business not the little guy like you and I.

[Mitchell Andrus]

Chapter 11 laws are set up to protect you too, if you ever need them. Not to stick up for the big corps., but... the sale of a gift card likely constitutes the completed transaction legally, and redeeming it's value for merchandise is another transaction that converts one type of corporate asset for another of lesser value - on the books at least - which is all the courts care about for now.

So... of course in order to protect assets for creditors (gift card holders included), remdeeming a card has to wait til the smoke clears.

Gift card holders are like investors in the company and like any other share holder, the investment can go down.

[Jim Becker]

Mitchell is correct...holders of gift cards are effectively "creditors", and like many other creditors during a bankruptcy reorganization (Chapter 11), they are not necessarily near the top of the priority list. This is not just limited to businesses, either...someone personally filing bankruptcy also gets to walk away from some creditors, while paying some others when that arrangement is made via the process.

[Peter Stahl]

Give a Visa gift card, they can use it anywhere. The other thing about store gift cards is the depreciate over time and do have a expiration date. Not sure about a Visa gift card, never used either I usually give a gift.

[Ben Rafael]

Visa gift cards are evil.
I was given a few. I used part of one and was then charged a monthly fee that used up the value of the card in less than 6 months. I had to call and argue to have the funds restored. Amex gift cards have similar criminal features attached.
Store gift cards, AFAIK, dont rip off the consumer this way.

No matter what kind of card you receive I suggest you use it up within a month.

[Randal Stevenson]

Give a Visa gift card, they can use it anywhere. The other thing about store gift cards is the depreciate over time and do have a expiration date. Not sure about a Visa gift card, never used either I usually give a gift.

Visa gift cards are evil.
I was given a few. I used part of one and was then charged a monthly fee that used up the value of the card in less than 6 months. I had to call and argue to have the funds restored. Amex gift cards have similar criminal features attached.
Store gift cards, AFAIK, dont rip off the consumer this way.

No matter what kind of card you receive I suggest you use it up within a month.

CASH is king. Not everywhere accepts credit cards!!!!!!!!!!!!

[Ben Rafael]

This is in today's L.A. Times

Gift cards can be the gift that keeps on taking
November 23, 2008

Thinking of giving gift cards for Christmas? Keep in mind that some come with expiration dates or fees. Gift cards that can be used at multiple unaffiliated businesses can carry purchase fees, monthly fees, inactivity fees, transaction fees, balance-inquiry fees and replacement fees.

They can also have an expiration date, which California requires to be printed on the card. Single-business gift cards can't expire and, in most cases, won't come with a service fee.

The business can assess a "dormancy fee" if the value on the card is less than $5 and the card hasn't been used in two years.

If the card is worth less than $10, the business must allow you to exchange it for cash. Gift cards or certificates for food can have an expiration date, which must be printed on the card or certificate.

Unfortunately, if a business seeks bankruptcy protection, its gift cards are pretty much worthless, unless the holder wishes to file a claim against the bankruptcy estate. For more information on gift card rules or if you have a complaint, contact the California Department of Consumer Affairs at (800) 952-5210.