Gift cards and vouchers

Your rights, and what to do if a company goes bust

Are you planning to give gift cards as presents, or perhaps you've got some stashed away for a rainy day? Make sure you know your rights in case the retailer hits trouble and stops accepting them.

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We're not generally fans of gift cards and vouchers. There are three main reasons why:

  1. If the shop goes bust, they can become worthless and there’s little recourse. So if you get them don’t hold them for long – and make sure it’s a big solid, reputable store, or one you can use at multiple stores. 
  2. Often they have dates (sometimes hidden) by which they need to be used.
  3. Cash is far more flexible. It has no expiry date and you can use it anywhere. 

A gift card makes a much nicer present than cold hard cash, doesn't it? Er, no, not really. You may not like giving cash as a Christmas present, but it's a much better way to give than purchasing a gift card. 

In fact, in December 2017 Martin did a Twitter poll of around 6,000 people and while 50% of people preferred to give vouchers as presents, of the same group, 70% preferred to receive cash. 

Surely there's little chance of a retailer going bust? It's easy to say that, but in fact a number of large high street companies have gone into administration recently, such as Debenhams and Arcadia Group (the parent company of Topshop, Miss Selfridge, Dorothy Perkins, Burton and more).

So what happens to gift cards/vouchers when a retailer goes bust?  Administrators can decide to stop accepting gift cards in this situation, meaning they could become worthless.

In this case, a gift card will be counted as part of the debts owed by a company, so you'll be one of the firm's creditors – and as unsecured creditors are at the back of the queue when it comes to payouts, it's very unlikely you'd get your cash back in full.

This lack of protection means if you have a gift card for any store, you should always spend it as soon as possible. (See our Administration Help guide for full on your rights when this happens.)

So if a retailer does go bust and I'm unlikely to get my money back, should I just throw my gift card/voucher away? No. Don't be too quick to chuck gift cards – administrators may have a change of heart. For example, House of Fraser went into administration in August 2018, but some customers were later issued with replacement e-vouchers in October 2018 after the firm was bought out.

In the past we've even seen other firms coming forward to accept gift cards when the retailer that's gone into administration won't honour them. When HMV entered administration in January 2013, for example, customers were given the option to exchange them for equivalent vouchers at Tesco, Asda or Boots instead. 

If a firm goes bust, is there anything else I can try? There are a few other tricks you can try to get your cash back if a retailer goes bust before you've used your gift cards. Here are your options:

  • Bought a gift card or voucher worth £100 or more on a credit card? Under Section 75 of the Consumer Credit Act 1974, if you pay for goods that cost between £100 and £30,000 and you pay for any of it on a credit card, the credit company is jointly liable with the retailer if anything goes wrong. What that means is you don't have to go to the retailer – you can choose to go to the credit card company and you have exactly the same consumer rights. 

    There's no guarantee a claim for a gift card will be successful but the Law Commission – which has made recommendations to the Government in this area – told us Section 75 rules DO apply to gift cards, so it may be worth a go. For full info on how to file a claim, see our Section 75 guide.

  • Used a debit card or spent under £100 on a credit card? There's valuable hidden protection on Visa, Mastercard and Amex credit cards and most debit and charge cards. It's called 'chargeback' and means if you don't receive the goods you bought, you may be able to get your money back.

    Unlike Section 75, this isn't a legal right, but the Law Commission says card providers will usually honour it when companies go into administration. For more info on how this works and how to submit a claim, see our Chargeback guide.

  • Become an unsecured creditor. This means registering your claim with the administrator – although as outlined above, there's no guarantee you'll get your cash back so it's best to try Section 75 or chargeback first.

Still want to buy a gift card/voucher for family and friends? If you're adamant you want to get a gift card, your best bet might be to get one which can be redeemed at multiple stores, such as a Love2Shop or One4all voucher.

Here, if one of the retailers signed up to the scheme goes bust, the recipient will still be able to spend it elsewhere – and they get more choice, anyway. However it's not totally risk-free – if the gift card's issuer goes into administration, retailers may refuse its cards.

Alternatively, if you must buy a card for an individual store, at the very least Google the company and do a bit of research to get an idea of its stability.

I've received a gift card/voucher – what should I do with it? It's simple – spend it as quickly as possible! That way you won't be affected if the retailer does go bust, plus you minimise the risk of you losing it/shoving it somewhere safe and forgetting all about it until after the credit runs out.

Remember, most gift cards and vouchers have expiry dates. Also check the terms and conditions of any gift card you get for any quirks. For example, from 18 months of the purchase date, One4all deducts 90p every month from the card's balance until it reaches zero. Love2Shop cards have an expiry date printed on them. 

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