Consider the risk of gift cards for your next birthday or Christmas present
After the unfortunate demises of retailers including Dick Smith Electronics, Masters, and Pumpkin Patch in Australia (to name a few), and my own shopping for Christmas gifts not a month ago, I began pondering an issue with the humble gift card. While this has been written with an Australian context in mind, the principles apply worldwide (and with a little local sleuthing, you should find local details appropriate for you).
For those of you not keeping up, when a retailer enters administration, a seemingly regular side effect is that already purchased gift cards go into limbo, held at the mercy of the administrators. As the administrator will receive no additional funds for the exchange of goods, they may choose not to honour the gift cards, or place additional terms on their use. Countless examples from the demise of Dick Smith Electronics occurred where people lost entire balances and large sums, as well as customers of Pumpkin Patch being told that gift cards would only be honoured if an equivalent amount of cash was spent in store at the same time.
With there being no legal requirement in Australia for gift card balances to be ‘treated like cash’ (despite most gift cards saying they should be treated as such), a gift card purchaser is at the absolute mercy of the continued solvency of the retailer. You know the old saying cash is king, this certainly holds true and gift cards it would seem, are definitely not king!
However, there is an alternative which, in my opinion, carries a significantly lower level of risk. Many people are unaware, but Visa offers both prepaid and reloadable cards that can be purchased from Australia Post stores (for Aussies) or from other retailers worldwide. Essentially, for a couple of dollars more than your ‘gift card balance’ you would like to buy, you can transfer your risk from the solvency of an individual retailer, to one of the major credit card providers of the world. Sure, Visa themselves could go under one day, but that is infinitely less likely than a single trading retailer going bust, in a single country.
The prepaid cards carry the benefit of being usable where any Visa card is purchased, so they are not locked to any one retailer, can be used physically in person, or online also. The reloadable card (available for around $7AUD more) can be used repeatedly and reloaded as many times as desired until the expiration date, which can also be beneficial in itself.
So, before you next purchase a gift card for a loved one, consider the risk you are willing to accept for you investment, and perhaps consider the Visa prepaid card as a preferable alternative. Call me risk averse, but I will put my bets on Visa being around for many many more years, major Australian retailers however, seem to be going bust like it is going out of fashion.
Final thoughts – My sympathies go out to all those affected from retailer demises, in my early years I too worked at Dick Smith, and have a lot of memories from there, in it’s day it was the best store, with the best customer service!