Dec 10, 2008 11:40 pm US/Eastern
Consumer Alert: Holiday Gift Card Pitfalls
With Many Retailers Bailing Out, There Are Several Things You Can Do To Make Sure Cards Retain Their Value
NEW YORK (CBS) ―
In a recent survey, 55 percent of consumers said all they want for Christmas this year is a gift card.
But as CBS 2 HD found out, it may not be worth anything when they go to redeem it.
Steve & Barry's, Linens 'n Things and the Sharper Image are just a few of the stores that have recently gone bankrupt or shut their doors, leaving anyone with a gift card out in the cold.
"Now, all of a sudden there is an inherent risk to gift cards," said Marshal Cohen of the NPD Group.
Nearly 25 billion gift cards are expected to be sold this holiday season, but with so many bankruptcies and bailouts consumer advocates are warning consumers to think twice about buying these cards.
"You could actually have a store that's open or going out of business or closing certain locations that won't accept the gift cards," Cohen said.
Other bankrupt retailers leaving customers with worthless cards include Bombay Co., Levitz furniture and even Bennigan's grill. Sharper Image alone has more than $20 million in unusable gift cards, partly because the chain sold them right up until the day it filed for bankruptcy and then refused to accept them.
"I prefer to get AMEX or something of that nature, a VISA gift card so that you use it anywhere," said Beverly Howard of Harlem.
Len Gordon of the Federal Trade Commission said it's important for consumers to know what they are getting themselves into.
"All of the gift cards have limitations on where they can be used and fees that are imposed when you use them, when you activate them," Gordon said.
To protect yourself:
* Check a retailer's or bank's Web site, including its shareholder's pages and news releases for financial trouble.
* Give the card recipient a copy of the receipt, plus the terms and conditions of the card.
* Use the card quickly.
"Any time you buy a gift certificate or a gift card for a specific location you're assuming the risk that that location is going to be in existence long enough to use it," Gordon said.
Buy a universal gift card from a mall, so you won't be left holding the bag. But use it quickly. They're notorious for dormancy fees as early as six months after purchase.
If you're stuck with a worthless card you can file a claim with bankruptcy court.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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