Retail experts urge caution with gift cards

Posted Nov. 25, 2008, at 8:19 p.m.

BANGOR, Maine — Holiday shoppers should carefully do their homework before plunking down hard-earned money to buy gift cards, according to retail experts.

But worried consumers shouldn’t read too much into an anonymous e-mail making the rounds which warns that many well-known stores may be closing all or some of their doors after Christmas, rendering those cards worthless.

“We have too many damned alarmists right now, we really do,” John Mahon, dean of the Maine Business School at the University of Maine, said Tuesday.

Gift cards are big business in the U.S., with card sales totaling $97 billion in 2007 and projected to top $100 billion in 2008, according to the National Consumers League.

The e-mail in question fans the flames of consumer concern by listing about 30 national retailers that are allegedly closing some or all of their locations due to the tough economic climate.

A careful reading of the list, however, shows that most of the store closures the e-mail claims will occur next year already have taken place. But experts say a lot of people are likely to take the e-mail at face value.

“It has reached the scale of urban legend in a couple of weeks,” said Russ Van Arsdale, director of the grass-roots consumer and advocacy organization Northeast CONTACT. “There’s a certain amount of — hysteria’s probably too strong a word, but people are getting alarmed.”

One of the stores mentioned in the e-mail is the Gap, which allegedly would close 85 stores. A Gap Inc. representative said 115 of the retail chain’s stores worldwide closed throughout 2008, but 100 stores were opened.

“As far as the e-mail is concerned, we don’t know where it originated,” said Catherine Rhoades of Gap Inc. “As far as the gift cards are concerned, our gift cards do not expire. We have more than 3,100 stores throughout the world, and they will be honored.”

Bangor Mall General Manager James Gerety said that he would have heard if the Gap or other mall tenants mentioned in the e-mail were planning to close after January, and he hasn’t.

“If consumers have concerns and questions, they should go online and see what the stores are saying,” Gerety said. “They don’t want to disappoint their customers, number one. And typically, if there is some change in their strategy, they will announce it.”

That was the case for national retailer Circuit City, which publicly announced its decision to file for Chapter 11 bankruptcy protection earlier this month.

But Gerety also said that shoppers should be particularly careful this season.

“You cannot predetermine in this economic climate if certain retailers will continue to operate in the future. It’s a tough retail environment,” he said, adding that few saw the demise of Linens ’n Things coming.

Though believing everything on the Internet may not prove useful to shoppers, Van Arsdale and Mahon have other ideas that should.

Consumers can help protect themselves before they buy by finding out whether the gift card’s value will erode over time and by checking to see whether the store is in financial distress, Mahon said.

Gift card recipients also should ensure they receive the full value of the gift by using it soon, he said.

“If you get a gift card, don’t put it away in a drawer and lose it,” Mahon said. “You should use it in a reasonable amount of time, within 30 days of receiving it. You might lose it, it might get stolen.”

Van Arsdale encouraged shoppers to do research before buying anything and to be aware that a Maine law enacted in February gives gift card owners a little help. Gift card owners with less than $5 left on their card have the right to ask for the balance in cash. The new law does not apply to pre-funded bank cards such as a Visa gift card, he said.

With all this caution, does an expert such as Mahon avoid purchasing gift cards himself?

On the contrary, said Mahon, who just bought 14 gift cards from L.L. Bean.

“It’s a Maine company, and I’d like to support a Maine company,” he said.

Gift card facts

The Federal Trade Commission issued a consumer alert about gift cards on Nov. 13. According to the FTC, there are two types of gift cards:

— Retail gift cards, which can be used only with the merchants that issued them. These cards may have expiration dates or a fee for inactivity.

— Bank gift cards, which carry the logo of a payment card network such as Visa or MasterCard and may be used at any location that accepts cards from that network. There are more likely to be fees for activation, maintenance or transactions on this type of gift card.

The FTC encourages shoppers to read the fine print, buy from trusted sources and give the recipient the original receipt to verify the card’s purchase in case it is lost or stolen.

Treat the card like cash, the FTC advises. If the card is lost or stolen, report it to the issuer immediately.

The FTC also advises shoppers to consider the financial condition of the business and whether it has filed for bankruptcy protection.

If customers buy cards from a company that goes out of business or files for bankruptcy protection, the card may end up being worth less than the face value.

For help with gift cards issued by retailers, contact the FTC at ftc.gov or 877-FTC-HELP. For help with cards issued by national banks, contact the comptroller of the currency at 800-613-6743.

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