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Gift Cards and Bankruptcy: Is your gift card worthless?

December 4th, 2008

With the amount of stores declaring bankruptcy, and store closings, people are becoming weary of purchasing gift cards.  According to a survey on gift card spending conducted for NRF by BIGresearch, a small number of people say that they are worried that the retailer will go out of business (3.1%).  Despite the nervous consumers, and down economy gift card sales are projected to bring in $24.9 billion in sales nationwide this year.  The Federal Deposit Insurance Corp. (FDIC) is trying to ease peoples fears in the hope that people will not curb their spending on gifts this year.

If you are a merchant who keeps your funds in an FDIC insured account, your customers now have no reason to worry.  The FDIC recently ruled that gift card balances may be insured.  The new ruling stated that gift card value will be seen as a “deposit”, meaning that as long as your funds are in an FDIC insured account, the gift card owner can make a claim for the value of the card despite bankruptcy

“The ruling by FDIC’s general counsel, may protect holders of gift cards issued by retailers like Circuit City, which has filed for bankruptcy protection, but also extends to open loop cards that are issued by financial institutions themselves. The ruling said cards can be insured up to the full $250,000 FDIC limit and noted that in cases where cards are not registered to an owner, the bearer of the card will be considered to be the owner.”

So if you are worried about buying or receiving gift cards this Holiday season, don’t be.  Although it is wise to monitor the news for potential bankruptcies and avoid cards for those merchants… to avoid the purchase of cards to any business is unnecessary.

Should you find yourself holding a gift card in February to a store who is filing for bankruptcy there are some easy steps to ensure your card is not worthless…

  1. Pick up the phone and ask the gift-card issuer if they are still accepting gift cards
  2. Use your card immediately…you may even get a great deal with close out prices!
  3. Check the competition. A Google search might give you information about competitors who are running special promotions targeting gift-card holders of the bankrupt company.
  4. File a claim against the company. For most major retailers this is easily done on their website.

If you are a merchant who is interested in gift cards for your location give Payex a call at 888.729.3848 today. We are offering 100 specially designed Holiday gift cards FREE with the purchase of 500 additional cards.  There is little initial investment required, and your customers will be thrilled to give others the gift of your business.

Entry Filed under: News,Rules and Regulations

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