Use Those Gift Cards

[BarTopDancer]

$75M in gift cards could become worthless (http://www.cnn.com/2008/LIVING/personal/03/06/gift.cards.worthless.ap/index.html)

[Gemini Cricket]

Why does it feel like that was the plan all along?

[Alex]

Sharper Image offered gift cards because they planned to go into bankruptcy?

It is, though, an another argument for why you should just give Euros instead of gift cards. Europe isn't going to go bankrupt but it still creates a bit of a hassle for the recipient.

[Gemini Cricket]

No, I think some businesses make money off of the fact that these cards go unused/expire.
I think in California, they can't expire. Or is that just for gift certificates?

[BarTopDancer]

No, I think some businesses make money off of the fact that these cards go unused/expire.
I think in California, they can't expire. Or is that just for gift certificates?

Gift cards and gift certificates. I don't think they can charge the "maintenance fee" either.

[Alex]

Absolutely they're doing it to make money off people who don't use it. That's also the idea behind mail in rebates. They also make money off the fact that the gift card purchaser is making an interest free loan to the merchant (this is why by accounting rules these are considered debts and get wiped out in bankruptcy) which they can invest and earn returns while the real value of the debt gets eaten away by inflation.

This transfer of risk of loss from the merchant to the consumer is the original reason for why you should give cash rather than gift cards.

But I don't think the plan all along was to go into bankruptcy to avoid honoring them.

[Gemini Cricket]

But I don't think the plan all along was to go into bankruptcy to avoid honoring them.
That's your interpretation of what I meant.

[Alex]

Yes, but the story is about bankruptcy meaning stores don't have to pay off on gift cards. You replied that you thought this the plan all along.

What other reasonable interpretation was there?

[Gemini Cricket]

Oh, don't be intimidated by my opinion. It's just an opinion.

[innerSpaceman]

In any event, I hope you like Jamba Juice, Gemini Cricket. Let's use my $20 in gift cards at the DTD location for your birthday. Heck, we can give some juices away as a token of your love for mankind.


(and we can give them to the juiciest hunks of mankind we can find)

[Gemini Cricket]

Okie Dokie, Smokey.
Jamba Juice it is. I haven't had me some wheat grass juice in quite some time.
:D


I received an online gift card just recently. I used it so fast that the ink was still wet.
:D

[I Heart Disneyland]

Thankfully I have none in my wallet. OH WAIT! I just bought a $100 one to DL last week! Hope they don't go out of business! :)

[€uroMeinke]

I wish I never used the Applebees gift card I got.

I like the idea of €uros though ;)

[Kevy Baby]

I hear on the news this morning (though I see nothing on the Sharper Image Web Site to corroborate) that SI will honor gift cards, but 1) you have to use the card on a single purchase, and 2) the value of the item must be at least twice the value of the card (I don't know of the TOTAL purchase needs to be 2X or if a single item needs to be 2X).

[Cadaverous Pallor]

This Sharper Image thing is unrelated to the "expiration date" issue.


I'm just really happy that SI is going bankrupt because the slid so far down the hill in the last few years quality-wise. My ancient gift cards sit unused in my purse because I don't want the crap they now sell.

[Kevy Baby]

This Sharper Image thing is unrelated to the "expiration date" issue.The OP linked a story about cards becoming worthless when companies go belly up. The lead company in the story was SI.

[Ghoulish Delight]

The OP linked a story about cards becoming worthless when companies go belly up. The lead company in the story was SI.Yes, which is an entirely separate issue from expiration dates or maintenance fees.

[BarTopDancer]

Linens n Things (http://news.yahoo.com/s/nm/20080411/bs_nm/linensnthings_dc)

[frodo potter]

The down side for companies that issue gift cards is that because they don't expire they have to wait a long time, usually 10 years, before they can declare a gift card that has not been redeemed as profit.

Until that time it is a loss for the company. With so many people buying gift cards these days and so many people never spending them it becomes difficult for medium size companies to deal with that loss on the spread sheet. How do you go to the investors and say
"Hey we sold $100,000 in gift card last month so we are $100,000 in the red and will be for the next 10 years, yea we have the money but we can't 'spend it' since it isn't 'ours." It would be much simpler if people just spent the gift cards when they got them or if people just gave cash instead of a gift card.

[Cadaverous Pallor]

Is it really true that they have a bank account full of the cash used to purchase gift cards and they can't touch it?? I don't believe that...

[Kevy Baby]

Is it really true that they have a bank account full of the cash used to purchase gift cards and they can't touch it?? I don't believe that...I don't pretend to understand all of the subtleties of it, but basically it is an accounting thing.

[Alex]

Yes, they can spend the money they get from gift card. However, as mentioned above, the revenue from gift cards is considered to be an unsecured loan to the company (from the individual consumer) until such time as they are redeemd.

There are reasons that this is good for the company (if there weren't, they wouldn't promote them and probably wouldn't have them).

But, they are debt and appear in the books as debt. And when you're financially on the edge that creates many problems. Imagine trying to find funding and saying "we're really on the edge of bankruptcy here, help us out and you'll get a big piece of the pie when we're good again. By the way, we took out a $120 million loan from our customers and we've already spent that money, which is why we're asking for money from you and that means in the next year you can expect us to give away $90 million in merchandise to repay those loans while we're also trying to make the profit that will justify you investing in us."

And it is bad for the consumer because the debt it unsecured which means if they do go into bankruptcy your mini-loan goes straight to the bottom of the pile when the bankruptcy judge is trying to settle the company's assets.