Panic: Are Consumers Scared To Buy Gift Cards?

Earlier this year when the Sharper Image declared bankruptcy, they briefly stopped accepting gift certificates. Eventually, they did start accepting them again — but with the requirement that consumers buy twice the face value of the card. This, it seems, has caused a fair amount of panic among consumers. Chain emails are circulating warning shoppers not to buy gift cards from various retailers — claiming that they are going out of business. But are they?

The panic comes from the danger that a company might declare Chapter 7 bankruptcy — which means they are being liquidated. Under Chapter 7 bankruptcy, there is a chance that a consumer holding a gift card can be considered an “unsecured creditor” — placing them nearly last on the list to get their money back.

The Sharper Image debacle alerted consumers to this possibility — and the after effects of this panic are still with us. Thankfully, retailers seem to have learned from this experience and many companies that are entering bankruptcy are taking steps to ensure that they are able to continue selling and redeeming gift cards.

Snopes gives a rundown of some current bankrupt companies and what they are doing in regards to gift cards.

So are gift cards safe? Well, they’re exactly as safe as they always were — but it wouldn’t be a bad idea to buy gift cards only from companies that are financially secure.

(Photo: The Joy Of The Mundane )