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Published: November 25, 2008
Do you have a gift card from a bankrupt retailer such as Linens ‘n Things?
Better spend it quick.
The chain, which filed for bankruptcy in May, is liquidating its 371 stores nationwide, including two in the Richmond area and seven others in Virginia.
Consumers can still redeem their gift cards. But they will be left holding
a piece of worthless plastic if they don’t do it before the stores close.
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Retailers Bombay Co. and Sharper Image already left customers holding worthless, or half value, gift cards when they closed stores.
The National Retail Federation said last week that more consumers than ever wish to receive gift cards this season.
Yet fewer shoppers plan to buy them and those who do expect to spend less on the cards — $24.9 billion versus last year’s $26.3 billion. People would rather scrounge through bargain racks this year, the retail group said.
Consumer groups, though, warn that in this bleak economic climate fraught with bankruptcies and store closings, it’s best not to buy gift cards.
“If you’re thinking of giving gift cards this year, think again,“ Consumers Union Senior Attorney Gail Hillebrand said. You cannot tell — and you shouldn’t have to try and guess — when the next retailer will go out of business.
Ed Mierzwinski, program director for the U.S. PIRG, the federation of state Public Interest Research Groups, said, “Don’t buy gift cards. It’s as simple as that. They’re popular but they’re dangerous” because they lack consumer protections if a retailer goes bankrupt.
Mierzwinski said that in a bankruptcy proceeding, gift-card holders get pushed to the back of the line, behind bigger creditors.
Just because a retailer files for bankruptcy, does that automatically mean its gift cards will become worthless?
Jim Babb, spokesman for Henrico County-based Circuit City Stores Inc., which filed for Chapter 11 bankruptcy reorganization this month, said the electronics chain asked for and received bankruptcy court permission to keep selling and redeeming its gift cards in stores and online.
Bankrate.com senior financial analyst Greg McBride said gift cards still are a good idea. “They’re still well-received by gift recipients. Consumers just have to be mindful of where they buy them.“
Consumers, here are some tips for buying and redeeming gift cards:
Don’t buy the card of a troubled store. “Gift cards are risky at a time when stores are filing for bankruptcy,“ Mierzwinski said.
The retail federation, though, said only 3.1 percent of the 8,117 consumers it surveyed worry that a retailer will go out of business.
Got an old gift card? “Spend it now while the retailer is still open,“ Hillebrand said.
Ask a bankrupt retailer if it will accept your gift card. You may be able to redeem it at face value, or half or less of its value, McBride said. “That’s better than not accepting them at all.“
You’ll pay extra to buy gift cards that can be used anywhere. American Express and Discover gift cards cost $3.95 each above the face value, and MasterCard and Visa gift cards cost about $4.95, Bankrate.com reported.
Learn what fees you may have to pay. Some gift cards are riddled with fees. But 84 percent of the nation’s 25 largest retailer charge no fees, the retail group said.
Some of the “use anywhere” gift cards from credit card companies have fees. For example, American Express charges a $2 monthly maintenance fee after 12 months and Discover charges $2.50 monthly if the card hasn’t been used after 12 months, Bankrate.com said.
Ask if there’s an expiration date. Most retailers have eliminated them, Bankrate.com said in its 2008 gift card study.
Visa gift cards, though, expire after 12 months; MasterCard’s and Discover’s after 24 months. “They expire like milk,“ Mierzwinski said.
Ask if you can use the gift card online. Not all retailers allow that.
Contact Iris Taylor at (804) 649-6349 or .
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