Gift cards: Perfect gift or useless plastic? ALYSSA PASSEGGIO, Senior Staff Writer Posted:12/20/08
Click on picture to Zoom
As Bayshore residents run out for that last minute gift for the holidays, some may be having second thoughts about purchasing of gift cards.
Rumors of retailers going out of business left and right have not dismayed shoppers from buying gift cards, but they might be more nervous about it this year.
“I think what we’re seeing is that consumer confidence is still very high for these products,” said Jean Landsverk, the vice president of prepaid services for First Data. The Colorado-based company processes gift cards for retailers nationwide.
Although Landsverk suggested sticking with retailers the buyer feels comfortable with, she added that there is a certain security in place.
“If a [business] was to have a poor performance this holiday season and did decide that they were no longer going to operate, any type of business decision doesn’t happen over night,” Landsverk explained. “[Consumers] typically have a year after announcement [of bankruptcy].”
In First Data’s experience, the majority of retailers that are liquidating would not be selling gift cards, Landsverk said.
The funds collected during the purchase of a gift card are held as a credit, not a debit for retailers, according to standard accounting procedure, she said. Therefore, she said, it would not necessarily benefit the company for consumers to not use their gift cards.
“If a [consumer] hears that a retailer is filing bankruptcy and is holding a gift card, [they should] spend it immediately, because there are no guarantees,” Jean Mathe, COO of the consumer-advocate Leverage, of California, said.
According to Mathe, when a company files for bankruptcy, it is up to the court whether or not they can continue to sell or accept gift cards.
Mathe suggests purchasing from stable retailers to be sure, but noted the problem with such practices.
“It is kind of a self-fulfilling prophecy,” she said, explaining that struggling businesses that lose sales to major retailers will only be in worse shape.
So, if a shopper’s loved one only wears clothes from a particular store or adores a specific restaurant, what can they do?
Both women suggest paying attention to what is going on in the market place after the holidays. A concerned gift-card holder could check the retailer’s Web site or follow consumer sites, such as Leverage’s www.savvywallet.com blog.
Further, Leverage provides free services to consumers online, such as the ability to swap gift cards.
New York economist Sam Pocker has been following the trends in gift card promotions and bankruptcy announcements for several years.
He warns consumers to be cautious if a retailer is offering significant deals related to the sale of gift cards.
“You never see these kinds of promotions, so when you see one, it is a red flag,” Pocker explained, noting instances with Linens & Things, Sharper Image and KB Toys.
All three experts admitted that situations vary from merchant to merchant, but that it is important for the gift-card buyers and receivers to keep informed.
It may seem a hassle to some, but Landsverk said it’s worth it.
“[Gift cards] are still better than getting a frumpy sweater,” she concluded.
Back
