Is my gift card worthless? How to find out its true value

With big-box stores closing left and right, everything you should know

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In recent years, major retail chains have announced the decision to close up shop, or announced that the end is near, as sales have begun sagging.

Earlier this year, JCPenney announced more than a dozen store closures nationwide. Many one-time major chains have gone this route, as well.

So, as Amazon and other online retailers' sales keep rising, and more and more traditional stores shutter, it got us thinking: What does it mean for people with gift cards to these businesses?

The answer is not as cut and dried as you might imagine.

Let’s back up. What’s the gift card situation if a store files for bankruptcy?

“The problem for gift card holders is that when a company is in this type of financial trouble, outstanding gift cards become just as vulnerable as the business itself,” said Shelley Hunter, the force behind the website Gift Card Girlfriend. Hunter has been studying gift cards for 10 years. “In fact, the cards are often deemed immediately useless -- even though stores are open and merchandise remains on the shelves. While some companies ask the courts for permission to continue accepting gift cards during bankruptcy proceedings, some don’t, and others only ask for permission to accept the cards for a limited period of time.”

"Immediately useless"? Yikes.

You don’t want to find out that you’ve missed your window to use a gift card -- especially one that’s been sitting in your wallet for ages.

And if you do miss out, in some cases, you're just out of luck. In other situations, there's a chance you can file a claim in order to join a list of creditors who want their money back, but nothing is guaranteed.

In this sense, gift cards seem a bit risky. Also, not everyone follows the latest news headlines regarding what stores and companies are thriving or filing for Chapter 11. So with that in mind, Hunter said, if you receive a gift card, you might as well use it -- sooner rather than later.

“(Sometimes, people will) get upset when they can’t use a gift card and it feels like their money is wasted,” Hunter said. “But they’ve had it for three years. So the onus is on you. You’re the one wasting it. If you’re holding a gift card in your wallet, you’re freezing the asset.”

Fair enough.

There have been some really unfortunate cases when it comes to gift cards and people losing out on their value -- especially when you look at the past 10 years or so. Borders closed in 2011, and Hunter, along with other experts, estimated that some $210 million was left on the table in outstanding gift cards.

When RadioShack closed about five years ago, it was a similar case, with estimates of $43 million remaining on outstanding gift cards.

In the RadioShack example, consumers were given a window of time -- and even an extension -- to use their cards, and then a website was set up where people could file a claim. Still, money was wasted. And it didn't have to be that way, Hunter said.

Or, consider The Limited, which closed its physical stores about two weeks after Christmas -- in early January 2017. You have to imagine that some people likely received gift cards for the holidays that season, then found themselves with mere weeks to cash in on the value.

The Limited's website came down Jan. 18, and that's when the company officially filed for bankruptcy, Hunter said. Yet it was confusing: The Limited was bought by another company, so an everyday consumer might not have known, or thought that the brand still existed, so the gift card would be fine. But alas, that wasn’t the case. In fact, even reopened in October 2017, but the new owner no longer accepts previously purchased gift cards.

Phew! Do you see how this can be a headache?

Here’s a really helpful “watch list” from Hunter’s blog. It includes a breakdown, merchant by merchant, of what financially struggling stores are still selling gift cards, what to do if you have one, etc. Below is a screenshot taken from the blog, with just a few examples.

Is my gift card worthless?

What to do from here

Hunter recommends seven pieces of advice if you’re stumped on how to spend a gift card -- especially if the company is going through bankruptcy:

  • Buy things you need: In the RadioShack example, even if you're not that into electronics, if you had a gift card, perhaps you could have stocked up on batteries. You’ll always need those around the house, right?
  • Buy gifts: Start your Christmas shopping early! Or think ahead to weddings, graduations or birthdays. If you can’t get anything for yourself, at least let the card save you some money elsewhere.
  • Buy items to donate: “Think about products the organizations you run or support could use -- and buy products they will appreciate receiving,” Hunter said. “Don’t forget -- you’ll also get a tax write-off.”
  • Buy items to sell: Do some research and figure out what might make you a few bucks back, either by selling it online or at a garage sale.
  • Sell your gift card for cash: It’s probably safer to do this with people who you already know and trust. But hey, make it worthwhile for both of you -- a $50 card that you’ll never use? Sell it to a friend for $25 or $30. Win-win!
  • File a claim: This isn't a very fun option, and there’s no guarantee you’ll get paid, but it’s worth a shot if all else fails or you're left without options.
  • Look for offers from competitors: Hunter said that when Sharper Image filed for bankruptcy and stopped accepting gift cards, Brookstone, one of its competitors, offered consumers 25% off any purchase if they surrendered a Sharper Image gift card in the process. Again, not a top choice, but it’s something.

Some final takeaways

Remember when we said that this topic gets complicated? You can probably already see what we mean. Even though we touched on this earlier, we'll reiterate one more time, some words of advice from Hunter: If you get a gift card, use it!

“Regardless of a store’s financial health, (don’t just hold onto it),” she said. “The higher the likelihood (is) that you’ll lose it, forget to use it, or the value has been reduced by fees, or again, the store could go under. (And of course), when you see a store’s in financial trouble, the urgency is even greater.”

And don’t jump to a worst-case scenario too quickly.

JCPenney was mentioned earlier, and in this case, it seems as though the company is closing some under-performing stores. But that doesn’t mean your gift card will become worthless. It might be a bit more inconvenient for you to use the card, but it’s still got value. If you're out and about near a JCPenney, go spend that gift card -- this week, if you can.

And one more reason not to wait too long, especially if a store is going through financial woes: Sometimes people want to hold onto their gift cards until merchandise is super low in price, as in, 75% off, so that they can get the most bang for their buck, so to speak.

But then the inventory gets picked over, and if a store is going through liquidation, sometimes, it no longer owns the merchandise by the end, so gift cards won’t be accepted throughout the sale.

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Moving forward, is it even worth it to buy gift cards?

Sure! Don't overthink all of this. It's not a total doomsday situation. A Visa or a Mastercard gift card, for example, can be used practically anywhere. Sure, you have to pay a small fee to load the card, but it’s likely worth it to the recipient, knowing that he or she can use the gift at any store or vendor of choice.

“Happy Cards” are another option: one gift card, but the recipient has some options when it comes to where to spend it. Typically, a list of stores is based around a theme -- fast-casual restaurants, for example, and if one of those restaurants goes under, your giftee will still have options.

Hunter recommends going through your wallet or the top of your dresser and tidying your cards. Get them in one place. Know what you have. For some college students, she said, it’s not unusual to have 13 gift cards.

“You might be surprised to see how much value you have in your wallet, and you’re the one not using it," Hunter said. "If you haven’t used it because it’s inconvenient, sell it. Get creative. Buy something and give it as a gift. If one isn’t working for you, it can still ease your budget.”

We asked jokingly if you can use a card too fast. This author of this story uses gift cards almost immediately. On the contrary, Hunter said, the faster the better.

“You’re honoring the gift," Hunter said. "That's probably what the (gifter) had hoped!

"That’s what you’re supposed to do.”

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