Spend Those Gift Cards Now

Gift cards have become an increasingly popular solution for the lazy shoppers among us. After all, if it's really just the thought that counts, your friends may as well pick out what they really want.

But as retailers flee our shopping malls and the threat of bankruptcy rises, there's something you should know about those pieces of plastic collecting in your wallet: they may not be good for long.

Fortunoff is a fine example. The New York-based luxury retailer filed for bankruptcy protection earlier this month after more than eighty-five years of business. As it prepares to sell its assets at auction next week, the company announced it will no longer accept gift cards online or in its stores.

Gift cards, it turns out, aren't as good as the money spent to purchase them. That's because companies must record the revenue received from them as a liability until the card is redeemed, at which time it is recorded as a sale. This is the same reason why retailers hate it when you don't spend your gift cards in a reasonable amount of time.

Several high profile retailers, such as Circuit City, Goody's, and Steve & Barry's, have already become victims of the economic recession. But more are sure to come. Moody's Investor Service predicts that 2009 could see three times as many bankruptcies as in 2008.

So if you've got any cards lying around for retailers teetering on the edge of disaster, it's time to go shopping. You'll be doing yourself and the shop a favor.

by Megan Barnett