Money Matters
By settling for gift cards, you avoid the stress of finding the perfect Christmas present while suspecting you will get it wrong. That is the upside. The downside is that you could be throwing money down the drain.
People holding House of Fraser gift cards, some worth hundreds of pounds, worried for months that their cards were worthless after Sports Direct bought the company. Sports Direct had no legal liability to honour the cards but eventually customers were promised full-value replacement e-vouchers. These can be spent only on the House of Fraser website and must be used by the end of January.
The gift card market is worth £6 billion a year. With the fragile state of many high-street retailers, more gift cards could, overnight, become worthless.
When you shop with cash or bank cards, you carry the items away and your purchase is safe. With gift cards, you hand over money in advance, trusting that the store will give you goods in return at a later date. Your money is not ring-fenced to secure it against bankruptcy, nor is it supported by any consumer protection scheme.
Even when the shop where you want to spend a gift card is still in business, there are drawbacks. Unlike cash, nearly all gift cards and vouchers have an expiry date, usually 12 or 24 months, though
some last longer. The cut-off date is not always made clear; yet, after the card expires, the company keeps your money. If you are stuck with an out-of-date card, appeal to the company for an extension. Some will revalidate old cards.
Gift cards are mostly issued by stores – which restricts your choice of where to spend them. There is, though, a move to expand the choice of outlets and provide protection against any one shop disappearing.
Some towns and cities, including Bath, Glasgow, Salisbury and Cardiff, now sell gift cards that can be used in dozens of their local retailers, restaurants, supermarkets and department stores.
The One4all multi-store card enables you to shop in dozens of different places around the country but has a sneaky penalty charge. If you have not used the card after 18 months, it takes 90p from the balance every month until nothing is left.
If Sports Direct had failed to honour the House of Fraser cards, purchasers would have had to join the queue of unsecured creditors with little hope of seeing their money again.
Anyone in this situation who bought a gift card for more than £100 and paid by credit card can claim a refund from their bank under the Section 75 rule.
If they used a debit card, they should ask their bank for money back under the chargeback rules, although success is not guaranteed. In both cases, only the person who bought the gift card, not the recipient, can claim. If you are the sort of person who finishes your Christmas shopping in October, be aware that the gift card will already have lost two months of its shelf life before the beneficiary receives it.
If you are given a gift card this Christmas, be sure to spend it as quickly as you can.