Thursday, March 06, 2008

Is your gift card worthless?

This article about $75M in gift cards could become worthless might make you think about using gift cards you've received or purchasing a gift card for someone else.

In summary, gift cards are treated as a loan to a company--not cash, so when a company like the Sharper Image files for Chapter 11 bankruptcy to reorganize/restructure its debts, gift card holders may not necessarily get paid or it will take some time before gift cards can be redeemed for their face value. The worst thing is that gift card holders are considered unsecured creditors so if they get paid (if there is anything left), it will be be after the secured creditors are paid through assets such as real estate, inventory, or accounts receivable.

Right now, if you have a gift card to the Sharper Image, it basically is worthless. Sharper Image announced on their website that it has suspended the acceptance of Gift Cards, Reward Cards, Gift Certificates or Merchandise Certificates as a form of payment.

I happen to have something like that, an in-store credit which I think is considered a merchandise certificate, which I won't be able to use until it is settled. I like Sharper Image. They have cool stuff and have been around for a while. I never thought that they would be in financial trouble. Hope they pull through or someone else buys them out and honors my in-store credit.

No comments: