As shoppers begin stocking up for the holidays, gift cards remain one of the most popular options. They're easy to buy, easy to give, and usually appreciated.
But consumer experts say there's one big risk many people don't think about: what happens if the business closes before the card is used.
WATCH as a woman describes what happened when she waited to use a restaurant gift card:
That's what happened to Nancy Bertline.
Like many people, Bertline often receives gift cards from family members during the holidays, but one card sat unused for too long.
She had waited to use it for almost 6 months, hoping to cash it in for an anniversary dinner.
"We called and nobody answered," Bertline said. "We left a message to see about getting a reservation. Nobody bothered to call us back."
She later discovered the restaurant had shut its doors for good.
"We were watching the news, and they went out of business," Bertline said. "My husband said, 'You're sunk now. We're not going to be able to get this back.'"
Don't save gift cards for a special occasion
Kyle James of ConsumerAffairs said one of the biggest mistakes consumers make is hanging onto gift cards for months, or even years, waiting for the perfect time to use them.
"Typically, you're going to forget about it and it's going to be too late," he said.
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According to Capital One Shopping, 43% of U.S. adults have at least one unused gift card, with an average of $244 sitting unspent. In its research, 12% have had a business close permanently before being able to use a gift card.
What to do if a business closes
If a company files for bankruptcy before you use a gift card, you may be able to submit what's known as a "proof of claim" with the bankruptcy court. That places you on the list of creditors seeking repayment, though there's no guarantee you'll recover any money.
The Consumer Federation of America recommends several other steps:
- Contact the business or owner directly
- If you purchased the gift card with a credit card, ask your card issuer whether you can dispute the charge
- Reach out to your state or local consumer protection agency for assistance
Act quickly if you hear a company may be closing
James said consumers should pay attention to reports that a business is struggling financially.
"I had a Sports Authority $50 gift card, and I heard they were going bankrupt and closing their stores," he said.
He admits he waited too long, hoping for deeper closing sale discounts, but in the end, wasn't able to use the gift card.
"Whenever a store goes into liquidation, they sell all their stuff to another company," James said. "And so, my gift card was completely useless."
Bertline said she’s left with a $100 gift card she can no longer use but still hopes for a solution.
"That's what I would hope; that they could do something for myself and everybody else," she said. "It would just be nice."
Bottom line
Gift cards may be a holiday favorite, but they're not always as good as cash. If you receive one this season, don't let it sit in a drawer waiting for a special occasion.
Using it sooner rather than later could help ensure it doesn't become a worthless piece of plastic, and you don’t waste your money.
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