Tuesday, November 11, 2008

Short Circuit in Gift Cards?

Circuit City Stores, Inc.Image via Wikipedia
If You've got a Circuit City Gift Card, Use it Now!

Circuit City tried to reassure shoppers that it would be business as usual despite its Chapter 11 bankruptcy filing. 

They've asked a bankruptcy court to let it honor gift cards.  That's simply rhetoric to reassure gift card holders.  In reality, the gift cards are about to "short-circuit" both in the context of their future as an acceptable electronic payment and the time they'll be around.

The purpose of bankruptcy is to "restructure" but having heard  rhetoric following the Pay By Touch "bankruptcy" filing and imminent "restructuring," I'd advise consumers to take into account the fact that Circuit City is a retailer in serious financial trouble. That will affect their gift cards.  Sorry...I'd love to paint a rosier picture, but a "Sharper Image" comes to mind instead.  (To refresh your memory, their gift card holders lost everything)

So if you have a Circuit City gift card use it immediately.  In fact,  I'd advise that you do that across the board with any retailer where you have a prepaid gift card.

In this environment, I've got 3 words for you..."use it now".  In the past, people have shown a tendency to hold on to the gift cards for a couple of months.   I'm not a big believer in gift cards, they're the opposite of a layaway program...you're basically "loaning" money to the retailer and getting nothing in return. 

But  if you must get one, and not many are considering it this holiday season (see previous post) instead of dolling out your hard earned cash for a store branded (closed loop) gift card, you should only "consider" purchasing a gift card that is Visa/MC/Discover/AMEX branded/backed,  (open loop cards)
  
I wouldn't be the least bit surprised, if  and when the Circuit City gift cards do indeed short-circuit, to see the gift card landscape vastly affected forever.  They'll either be some new regulation introduced, someone will come up with an improved program or consumers will shy away, at least from...closed loop gift cards.


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