The real value of gift cards in these fleeting, belly-up times

The real value of gift cards in these fleeting, belly-up times

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Story Published: Nov 17, 2008 at 5:03 PM PDT

Story Updated: Nov 21, 2008 at 5:52 AM PDT

By Herb Weisbaum & CNN

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Gift cards were huge for the holidays last year. They were perfect for stocking stuffers or for someone who's hard to shop for.

But retailers are struggling right now. Some are going out of business. That means giving a gift card can been risky.

Still holding onto that gift card from Sharper Image? Or Bombay Company? Too late. They've gone out of business.

How about Linens N Things? Better move fast. It's closing shop and liquidating.

Consumers will lose $100 million this year on worthless gift cards, from restaurants and stores that have gone belly up.

It's tough out there for retailers. Mervyn's is going out of business for good. CompUSA has closed most of its stores. Starbucks is shutting down about 600 stores, and Circuit City has filed for bankruptcy.

Tod Marks writes a blog for Consumer Reports called Tightwad Tod.

"What I would suggest people do if they have a gift card from a Circuit City or another store that happens to be in Chapter 11 right now? I would say run, don't walk to that store and buy something quickly because you just don't know when the plug may be pulled," he said.

For now, your Circuit City gift card is safe. Last week a judge ruled the retailer could continue to accept them, and even issue more cards while it reorganizes.

So how should shoppers react to all these? Should you shun gift cards this year?

Retailers say there's nothing to worry about.

"Most gift cards in this country, regardless whether a retailer has declared bankruptcy, are perfectly safe, and can be redeemed," said Ellen Davis with the National Retail Federation.

In many cases, the bankruptcy does allow a retailer to accept gift cards even though the company is in Chapter 11, but not always.

The editors at Consumer Reports says companies rarely put money aside to pay off gift cards if their business fails. When that happens, card holders must get in line in bankruptcy court behind lots of other creditors.

Bank cards may be safer, but as I've warned you in the past, they can have annoying fees and expiration dates. They can also be hard to use.

By the way, for anyone who has me on their gift list this year, I have no problem with cash or a check.

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