Gift cards - a financial gadget gone bad

November 17, 1:01 PMGadgets ExaminerDan Appleman

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A familiar sight at many supermarkets
but are they a good idea?

Enter almost any supermarket and you’ll see racks of gift cards. And despite their convenience, they can be the worst possible gift.

Sure they are easy to buy, and you don’t even need to wrap them. They let you avoid the stress of guessing what someone would actually like – as long as you know the type of store they like to shop in, they can buy what they want when they want it. And if you don’t even know the type of shop, you can get a Visa or American Express gift card that they can use almost anywhere.

The problem with these cards is that many recipients don’t use them right way. And if you don’t use them right away, there’s a serious risk that they may become worthless.

First, most cards have a kind of planned obsolescence built-in that is as bad as any gadget that fails the day after the warranty expires. Some expire after a year or two – their value lost. Others start charging monthly fees against the card after a period of time – slowly sapping the card’s value until it’s worthless (the Visa and American Express gift cards are the worst on this score).

Second – if you have a gift card for a store that goes bankrupt, you become a creditor of the store. The card may become worthless, or you might recover a portion of the value. But chances are you’ll never see the full value of the card.

Here are a few additional suggestions with regards to gift cards:

• If you have any lying around, use them now.
• If you have a card that has lost value, call the customer service number on the card. In some cases they’ll restore the value one time only and give you a limited amount of time to use it. In some states they have to do this.
• Be sure to let the recipient know how long they have to use the card.
• Consider the financial health of the store that issued the card. Remember, even the largest chains can go bankrupt (Sharper Image, Circuit City, Mervyns…)
• Stick with gift cards for products that can’t be wrapped (Movie tickets, Amusement park tickets, Restaurants)