Yet Another Reason to Avoid Gift Cards

Mar 11, 2008 by Adam C. Powell, Ph.D.

I’ve written several times in the past about the problems caused by gift cards. Now, there is yet another reason to avoid them…

Gift cards can be invalidated by bankruptcy proceedings!

On March 3rd, the Associated Press reported that The Sharper Image had temporarily stopped accepting gift cards in late February due to its Chapter 11 Bankruptcy Proceedings. Luckily for consumers, The Sharper Image decided to change its policy towards giftcards. On an update printed on its website, The Sharper Image wrote:

If you choose to redeem your card/certificate, you must purchase merchandise equal to twice the current value of the card/certificate in order to redeem it.

So, what was once a generous gift briefly became no gift at all, only to finally become half a gift. Gift cards are considered low-priority debt by a company. In the event of a bankruptcy, a company may eliminate its gift card obligations while eliminating its other debts. Yet another reason to not give gift cards. Everyone would have been better off had their friends and family members had the sense to select items for them at The Sharper Image, or had they given them cash if there was no obvious choice.