How The Internet Lies To You...
Snopes is a website dedicated to vetting out urban legends, including those passed along through E-mail. I ran a search for the recent e-mail being passed around not buying gift cards due to several recent or impending store closings and found this, which was posted a few days ago:
Store Closings
While the numbers aren't likely to look good this Christmas for many retail stores thanks to this lovely economic setback we're currently enjoying, the reports of the impending deaths of several companies have been greatly exaggerated or misreported. Other companies have indeed been facing closure or bankruptcy, but that kind of thing happens all the time and it is currently not on the grand scale that we are left to believe.
The major concern with these types of scares is that it puts people in the mindset that "oh well, this store is closing down so I should not shop there until their big going out of business liquidation sale starts," when there may not be any credible facts to support this. Especially this time of year, anything that will deter the consumer from filling the cash registers of these businesses ends up hurting the business.
Having said that, gift cards do indeed bear certain risks. Under current law, if a retailer or restaurant does indeed file bankruptcy, it is left up to the bankruptcy court judge to decide the fate of those who are holding gift cards. Usually these cards have been thrown out by these judges in favor of other creditors. This means that if a company does go under, you can lose all the money on your gift card.
A company, even one that's been around for decades, can go under, so it's best to not hold onto gift cards any longer than you have to. Doesn't mean that you have to spend them the very next day, just means that you shouldn't hold onto one for six months and never spend it.
There are several consumer groups out there currently petitioning the Federal Trade Commission to provide safeguards for gift card money, but nothing has been set in stone as of yet.
The big concern with the Visa gift cards is that the credit card companies often charge hidden fees for you to use them. One such fee is the usage surcharge, where they charge you either a certain percentage (1% to 3% of your purchase) or a flat rate fee ($2.50, for example) every time you use them.
Another lovely fee is the so called "storage" fee where the credit card company will deduct money from the value of the card for actually not using it in a certain amount of time. $2.50 every six months, for example.
Regular store gift cards can be awesome, but they are just as useless if they're not redeemed. Companies make a ton of moolah off of people who never use their gift card in their store. In cases like that, the company is basically printing money.
Best advice I have is to buy them from places you know and to make sure that the person who is receiving the gift card enjoys shopping there and will most likely use that card as soon as possible.
Labels: Consumerism, General Commentary

