Shoppers Beware- BAD News For Gift Cards

This is an FYI (for your information) that was just released by the Associated Press and is super bad news for gift card holders and threatens the future of gift cards. It is very interesting to know that you can buy a gift card one day and it can be worthless the next…what is this world coming to? I thought every shopper should know!

You know that Sharper Image gift card you got for Christmas? Right now, it’s worthless. And other gift cards in your wallet could lose their value, too. As more retailers file for bankruptcy or go out of business, more than $75 million in gift cards are at risk of becoming worthless pieces of plastic this year.

 

The Sharper Image announced late last month that it was suspending the acceptance of gift cards, at least temporarily. It urged shoppers to check the company Web site later this month for an update. That is typical of businesses that reorganize under Chapter 11 bankruptcy, which treats gift cards as a loan to the company, not as cash.

For many shoppers, it’s a harsh lesson about the risks of gift cards. Consumers spent an estimated $26.3 billion in gift cards at retailers alone last holiday season, compared with $24.8 billion in 2006 and $18.48 billion in 2005, according to the National Retail Federation.

The number of retail bankruptcies or liquidations this year is expected to reach the highest levels since the 1991 recession.

Brian Riley, senior analyst at The TowerGroup, estimates that shoppers could lose more than $75 million just from stores and restaurant closings in 2008.

TowerGroup’s figure doesn’t include mom-and-pop services like the local nail salon. Riley said such small operations, which are most vulnerable to economic downturns, pose the biggest risks to gift card holders.

The gift-card problem provides more ammunition to consumer-advocacy groups that have lashed out against expiration dates and burdensome fees imposed if cards are not used within a certain time frame. More than 20 states have passed regulations loosening restrictions on the use of gift cards. Even if retailers wanted to honor them, they may not be able to because they can not afford it.

I hope this information helps some of you out there and inspires you research your bags and wallets to figure out which gift cards you may have and spend them or ask the retailer to give you the information on what their gift card policies are. Good Luck I hope none of my readers have feel into this predicament with Sharper Image.

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