Reader Tips: Gift Card Warning

And now, wouldn't you know it... KB Toys has declared bankruptcy.

All gift cards have been suspended, and cannot be redeemed.

http://www.kbtoys.com/help/KBgiftcardinfo.html

Angela, I will often check a store via http://finance.google.com to see if any the financial stories talk about pending or possible bankruptcy. It isn't a perfect system, but it did give me indications 6 months or so ago that Linens N Things could potentially be in trouble, and naturally now I am happy I don't have their cards.

I never even thought about that... I guess this year is a gamble? I guess I am really bad at assuming a large company that has been around forever will not go away, thanks for the warrning... too bad it does not help the GCs I have already bought... Is there ever warning signs from these companies that things might be going in that downward direction?

I didn't even think about gift cards not being redeemable because a store goes under. Smart idea to think about that and make plans accordingly.

I'm personally not a huge fan of giving or receiving gift cards -- I am not a huge shopper, so I may not get around to using my gift cards anyway. This year, like Melinda, I'm doing gifts from my kitchen including (semi-homemade) cookie kits. Happy holidays everyone!

Angela, you may be missing one fact (if I understand you correctly). You know those "going out of business clearance sales?" Yeah, well you can't use Gift Cards at those sales. At that point, the company is being liquidated (usually by a third party) to benefit creditors. Your gift card now makes you an "unsecured creditor" and that gift card for all intents and purposes, useless and valueless.

Now, look around. How many stores are having drastic price cutting already? The forecasts are even more dire. How do you determine who is not going to be declaring bankruptcy in January as soon as it "becomes clear" that the season did not bring the sales they need to survive, or at least have to turn to the courts to "reorganize" (which includes wiping out "debt" like previously issues Gift Cards).

That is the point that I was talking about (though Ivy, ever wise as she is brings it to a logical extension and suggestion). All I was saying, is you better be sure you trust that store is going to be there, otherwise that gift card may be useless when you go to use it.

For those that suggested Amex/Visa gift cards, just remember those cards have a fee to use (about $4 or so depending on provider), and fees to the recipient ($2/month amex, varies with Visa depending on issuer)

It is a buyer beware time. So just be careful your hard earned money goes where you want it to. Happy Holidays to all.

When companies declare bankruptcy they no longer have to honor gift cards which is the concern. Some companies will choose to honor them despite declaring bankruptcy or honor then at a reduced rate (say only half the face value) but they don't have to.

I received a couple Visa gift cards for my wedding and they were great, just make sure you use them before they start charging you for carrying a balance. In Visa's case after a year it cost $1-$2 a month.

If you get a gift card and you are worried about the store it's from I would use it by the end of January but that's just me.

I think giving GC are still a great idea... most of the stores you mentioned above did not just up and close their doors over night, they had clearance and I know you can still use your GC on clearence stuff. You just have to be aware of where you have GC for and remember to use them. I am also the type of person that does not leave GC lay around... I got them to use and I will use them usually within 6 months of getting them.

I wish my family would realize this...I am a college student who is trying to pay bills, and all they want to get me is presents that I don't really need. I would LOVE the gift cards for places that sell gas, but apparently that is Christmas-y enough. And don't even get me started on money...apparently that is the lazy person's way to give out Christmas presents (but I really need it!)

I just want to second the above comments. Many credit cards offer gift cards that are redeemable most places. ALWAYS read the fine print though because there may be fees associated with them if not used within a certain time frame, etc.

On the practical side, it might be an interesting gift to give a CD or other funds that aren't immediately available along with some financial advice (make it into a craft project somehow?). These days, even the "experts" could use a gift like that. (Yes, I know this falls into the un-fun gift category, but I swear some of the worst gifts I ever received were some of the most valuable in the long run - and most remembered!)

American Express also has gift cards.

I only know this becuase, before we moved overseas, my husband's co-workers presented him with 2 larg-ish ones for going away/expecting a baby gifts. They assumed that, like the travel checks, we could use the gift cards overseas. Luckily, I read the fine print and discovered we'd need to use them before we moved. A really, really nice digital camera and accesories was easy to pack, and totally justifiable as a baby gift, right? At any rate, we use it every day.

You know, I totally agree with you. In fact, this year, I'm giving gifts from my kitchen. But don't forget, they also have Visa gift cards out there. (The only reason I mention this is because I'm 90% certain my daddy is getting me one for Christmas.)

Hugs,
Melinda