Gift cards: Your rights Q&A

A gift card can be the ideal Christmas present solution for those hard-to-buy-for friends or family, but make sure you swot up on your rights first – as no one wants to be left with a worthless rectangle of plastic.

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The question of whether gift cards are safe is a valid one. After all, several high street names have gone bust in recent years, in some cases leaving gift card holders high and dry.

In January this year, HMV announced it had gone into administration, and owners of gift cards were told they couldn’t be redeemed in stores, although later, the administrator Deloitte said that vouchers would be honoured after all.

And Jessops, Comet and Woolworths are just some of the other examples of major stores going bust with their customers left bewildered about what to do with their gift cards and vouchers.

Here’s our Q&A on what your rights are when it comes to vouchers and gift cards, so that if you are planning on giving one or more as a present this Christmas – or if you receive one yourself – you know exactly where you stand if something goes wrong.

Q. How do gift cards and vouchers work?

A. When you buy a gift card of voucher, you’re effectively purchasing a credit note for a particular shop or group of shops. You can then use the card or voucher to buy something from the relevant store, which is why cards and vouchers are a popular choice as a gift, as they enable the recipient to choose exactly what they want.

Q. What happens if the shop goes bust?

A. If this happens, then it’s up to the administrator who is brought in to decide whether or not it will allow gift cards and vouchers still to be accepted. In some cases, the cards and vouchers might be refused even while the shop remains open, but in other cases, as happened at HMV, gift vouchers were eventually accepted even though the store had gone into administration.

If vouchers and cards are refused once a company goes into administration, then you are extremely unlikely to get your money back. As a voucher or gift card holder, you will have to join the queue of creditors owed money by the company and the only possibility of getting your money back is if there is any cash left once all the businesses assets are sold.

A spokesperson for the Trading Standards Institute said; “Whether the administrator will honour vouchers and gift cards for claimants will depend on the financial state of the business. Consumers are advised to lodge their claim as soon as possible after a retailer has gone into administration to increase their chances.”

Q. Surely the odds of big name retailers going bust are very slim?

A. I’m afraid not. Many businesses have been hit hard financially by the recession and we’ve already seen several well-known stores go into receivership including Comet, JJB Sports, Game, Habitat, Jane Norman, Viyella, Officers Club and Barratts, although some of these companies recovered and came out of administration, while some were bought by other businesses.

Don’t tear up any gift vouchers or cards as soon as you find out the store you’ve bought them from is in trouble though, as if the company involved is bought by another business, that company may agree to continue to accept gift cards and vouchers purchase before it took over.

Q. What can I do to protect myself if I want to give a gift voucher this Christmas?

A. If you’re thinking of buying a bigger value gift voucher or card as a Christmas present, make sure you pay for it using a credit card.
Under Section 75 of the Consumer Credit Act your credit card protects anything you buy costing over £100 (and below £30,000) – and this still applies even if it’s just the deposit you put on the card. So, if the company that’s sold you something goes bust before a voucher or gift card can be spent, you can still get a refund.

If you’ve obtained vouchers through a third party, this might also give you some protection, although it’s not guaranteed. For example, when camera store Jessops went bust, Tesco promised to refund any customers who had exchanged their Tesco Clubcard vouchers for Jessops tokens.

If you are buying gift vouchers or cards for smaller amounts, then you have very little protection in the event that the company they are from goes bust. So, if you are nervous, you may be better off giving a cash Christmas present instead.

Q. What if I’m given a gift card or voucher this Christmas?

A. Get out there and spend it as soon as possible, especially if you are concerned that the shop it’s from could run into financial difficulties. If you’ve already got gift cards or vouchers hanging around then again you should spend them without delay, especially as many of them have an expiry date, and the card will become worthless if you don’t use it by this date.

If you’ve discovered a voucher or gift card lurking in the back of a drawer that has already expired, it’s still worth asking whether the relevant store whether they might still accept them as a goodwill gesture, but remember that they are under no obligation to do so.

Q. Can I get a refund on an item if I’ve used a gift card to buy it?

A. Yes. Provided you’ve kept your receipt, your rights as a shopper are the same as if you’d paid in cash or using a debit or credit card. Under the Sale of Goods Act, if you buy an item that is faulty, not as described or unfit for purpose, then you are entitled to get your money back, whether you’ve bought it online, or in a shop.

Most stores will refund or replace what you’ve bought without question, but you’ll need proof of purchase. Unfortunately you have no right to return something you’ve bought simply because you decide you don’t like it when you get it home, or because it is the wrong style or colour.

However, many shops offer generous returns policies which enable you to exchange items if you don’t want what you have been given, provided you return the item within 28 days.

Q. Can I get gift vouchers which I can use in more than one store?

A. Yes you can, and these ‘multi-store’ gift cards are a good option if you are particularly concerned about retailers going bust. In the event that this does happen, you will still be able to use the card in a number of other stores, so you won’t lose out financially.

Q. What if I have bought goods online, the store goes bust but I haven’t received them?

A. Call the company and find out what stage your order is at. If the goods are at the warehouse, you may still be able to get your hands on them, as the ownership has switched.

If you have no luck here and the goods are worth more than £100 which you paid for on a credit card, you will be fully reimbursed by the credit card provider under the Consumer Credit Act.

If the goods cost less than £100 (or you paid with a debit card) but more than £10, try claiming on Chargeback. This is a voluntary scheme, operated by Visa, Amex and MasterCard that covers you in certain events such as this. You’ll have to make the claim with 120 days of purchase.

Failing this, you may just have to join the list of the company’s creditors.

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