Time to Cash In: The Ugly Future of Gift Cards & Exchanges

A few years ago, it was a dream come true for consumers to purchase gift cards-the perfect gift for anyone on your list. For others, it was a joy to see businesses come into existence that allowed you to exchange unwanted gift cards for cash.

Today there are thousands of Internet businesses out there that offer gift card exchange services-sites that allow people to sell, swap, or buy unwanted gift cards. But how long will these businesses last?

With retailers struggling this holiday season, and big names like Circuit City closing stores and filing for bankruptcy protection, some consumer advocates warn that store gift cards are the gifts that may stop giving. If you buy a gift card from a retailer that goes bankrupt, it is uncertain when, or if, it can be redeemed.

In the case of Circuit City, the company sought permission in bankruptcy court to honor its outstanding gift cards. However, these requests are strictly at the option of the company. Depending on the severity of the business's financial situation, some may choose not to honor gift cards at all.

According to research by the TowerGroup (www.towergroup.com), gift card holders lost more than $100 million dollars this year. The bulk of these worthless gift cards came from a few big stores that filed for bankruptcy, such as The Sharper Image, Linens 'N Things and Bombay Company. However, this figure also includes many smaller stores across the country that went bust.

This kind of news may deter shoppers from purchasing gift cards-once a popular present for those deemed "too hard to shop for." People once thought these gifts were "as good as cash," however, this is not the case in today's economy.

With less cards being purchased, there will be less unwanted cards. With less unwanted cards, the services of gift card exchanges will no longer needed.

In addition to the possibility of gift cards not being worth the plastic they are printed on, gift card exchanges have often been criticized for the taxation for their services. With fees varying from $1.99 to list a card for sale to exchange fees of up to 5% of the card value to shipping charges of up to $16.95 to deliver your exchanged or sold card to the buyer, this is yet another factor that makes these exchanges less attractive.

With all this said, if you have a gift card, run, run, run to the store to cash it in! Even if you don't purchase something for yourself, it may be possible to find a gift for someone else. And please, avoid gift card exchanges. If you are the seller, the fees charged for your sale or swap may amount to the value of (or more than the value of) your card. Conversely, if you are the purchaser, by the time you get your card, the redeeming company may already be bankrupt. If you are still stuck trying to find the perfect gift for that person who is "too hard to shop for," consider the best gift of all-cold, hard, cash.