Use Those Gift Cards

Alex · 03-07-2008, 12:40 PM

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 · 03-07-2008, 12:42 PM

Quote:

Originally Posted by Alex

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 · 03-07-2008, 12:44 PM

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?

03-07-2008, 12:40 PM	#1
Alex . Join Date: Feb 2005 Posts: 13,354	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.
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03-07-2008, 12:44 PM	#3
Alex . Join Date: Feb 2005 Posts: 13,354	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?
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