Gift Card Blog - ScripSmart

Blockbuster Gift Cards Will Be Worthless After April 6, 2011

In September 2010, we wrote about Blockbuster's bankruptcy and recommended anyone who owned a Blockbuster Gift Card to go out there and redeem it soon or risk getting stuck with a worthless gift card. We also sent out Bankruptcy Alerts to those who had registered ownership of the gift card in their ScripSmart Account. Furthermore, the Blockbuster Gift Card was on our list of gift cards to avoid for quite some time before the company actually filed for Chapter 11 bankruptcy protection.

One Last Chance

Obviously Blockbuster's bankruptcy proceedings are not going well; the company is set to stop honoring gift cards on April 7, 2011. That gives gift cardholders one more week to go out there and redeem their Blockbuster Gift Cards: April 6, 2011 will be the last day Blockbuster gift cards will be accepted. If you own a Blockbuster Gift Card go out and redeem it now!

Local Blockbuster Call

I called my local Blockbuster and was informed the gift cards were being sold up to "about two weeks ago" and they stopped selling gift cards after learning they would no longer be accepted.  According to Blockbuster's website, the Notice was effective 3/23/11 which indicates gift cards where being sold up to one week ago. This indicates a consumer could have purchased a gift card from Blockbuster and end up with a two week expiration date! I'm waiting on a response from Blockbuster's Corporate Communication Team on more details and will update this post accordingly.

Update: Blockbuster Corporate Communications responded to my note. They believe it was 03/21/11 and said Blockbuster would be sold to a new owner on 04/07/11. I also asked if there was a chance of the new owner accepting the gift cards and they answer was yes. However, I'd say the chances are slim the new owner decides to accept the cards, although it would be a good way to avoid burning the customer base and continue Blockbusters turnaround.

Chapter 11: The Red Flag

Filing for Chapter 11 bankruptcy protection indicates a company plans to restructure and stay in business. While it's possible the company will survive, it's a very good reason to go out there and redeem your gift card as soon as possible. In fact, it's a good time to go out there any redeem all of your gift cards. As we've seen, there is just no reason to take a chance. I've already sent a personal note to those who currently have a Blockbuster Gift Card in their account letting them know about the April 6th deadline.

Companies Are Allowed To Sell Gift Cards While Under Chapter 11 Bankruptcy Protection

To the best of my knowledge, there are no gift card laws which prevent a company from selling gift cards while in Chapter 11. In fact, it seems to be quite common to "continue business as usual". The decision to accept gift card while in bankruptcy is the Bankruptcy Court's and often times gift cards are also accepted. However, this is one good example of why it may not be such a great idea for company to solicit unsecured loans from consumers (market and sell gift cards). There will be another post in the future covering this point in more detail.

ScripSmart Accounts Can Help

Unfortunately, it's all too easy to be Blockbuster gift cardholder and have no knowledge of this deadline. That's why ScripSmart offers an alert system. One such alert is the Bankruptcy Alert; simply put, when we catch wind of a company going into bankruptcy or consider a gift card to be issued by a financially unstable company, we'll send you an email giving you a heads up and one last chance to avoid getting stuck with a worthless gift card. Sign up here and register the gift cards you own for some extra protection. The service is free.

For the record, here is the statement from Blockbuster's website:

 NOTICE EFFECTIVE 3/23/11: On 8/23/10, Blockbuster Inc. ("Blockbuster") filed for bankruptcy in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). On 2/21/11, Blockbuster filed a motion with the Bankruptcy Court requesting authority to sell its assets (the "Sale Motion"). A copy of the Sale Motion is available at http://www.kccllc.net/blockbuster. On 3/11/11, the Bankruptcy Court entered an order authorizing Blockbuster to proceed with certain procedures related to the Sale Motion. In connection with this sale process, effective as of 4/7/11, BLOCKBUSTER GiftCards® ("GiftCards") WILL NO LONGER BE HONORED. Blockbuster intends to honor GiftCards presented by consumers through 4/6/11.

Harry & David Files For Bankruptcy - Gift Cards Still Accepted

Longstanding retailer Harry & David has filed for Chapter 11 bankruptcy protection; the Oregon based merchant has been in business since the 1930's. Gift cards will still be accepted for payment and while Chapter 11 indicates the company plans to restructure and remain in business, now is a great time to go get some merchandise with your Harry & David Gift Card.

According to a recent Bloomberg article, the retailer faces stiff competition from lowcost internet retailers, a trend I expect to continue. Assuming the competition remains fierce, Harry and David will need to rethink their business model. I expect a sizable portion of it's factory outlet stores to close doors and the product line to be slimmed down, all in an effort to reduce debt and capitalize on the changing landscape.

Keep in mind, the Harry & David Gift Card is also redeemable online at harryanddavid.com.

Private Companies: Tougher To See It Coming

Harry & David was on ScripSmart's list of gift cards to avoid. While there were a few articles in the press covering the poor financial condition of the company, we just didn't have much insight into their financials. Thankfully gift cards are still being accepted and we may become more aggressive in adding merchants to the list of gift cards to avoid. One thing is certain: until this matter is cleared up, the Harry & David Gift Card will remain on our list of gift cards to avoid and those who own them should redeem ASAP!

Gift Card Cooperatives: Omaha's Downtown Gift Card

05/19/11 Update: Omaha's Downtown Gift Card is now available for purchase.

Nebraska consumers will soon have a new gift card option: the Downtown Gift Card. In short, it's a gift card which will be redeemable at several local businesses in downtown Omaha.

According to Joe Gudenrath, Executive Director of Omaha Downtown Improvement District: the Downtown Gift Card will be available this May, cost $1.50 to purchase and the funds will never expire (the card itself expires after 9 years, but replacement cards will be issued free of charge). Joe currently has over 60 businesses willing to participate and expects to have over 100 by the time the gift card launches.

More Options, Less Risk

We've written about the pros and cons of small business gift cards and see this as a solution to one of the biggest cons: risk. The fact is, smaller business are more likely to go out of business and you're less likely to know when it's going to happen. Unfortunately, this results in a higher probability of ending up with a worthless gift card. However, a gift card which is redeemable at several unaffiliated businesses allows consumers to hedge this risk and choose from a wide array of redemption options.

Support A Cause

People like supporting a cause; we've seen the rise of gift cards for charities and a gift card cooperative offers a similar dynamic: support local business. Furthermore, a the core of this program is cooperation among local businesses for the greater good. It's just another great way to bring a local business community together.

A Trend To Continue

Cheers to Joe Gudenrath and the Omaha Downtown Improvement District for finding a new way to drive local business. I see gift card cooperatives such as this as a trend which will continue because they are a solid option for consumers.

Omaha's Downtown Gift Card will be available at select lcoations Downtown and online at omahadowntown.org.

Starbucks' Mobile Gift Card: 3 Million Customers Strong

Today Starbucks disclosed usage numbers on a new way to redeem the Starbucks Gift Card also know as the Starbucks Card. According to Howard Schultz, Starbucks CEO, more than 3 million consumers have paid using a new mobile gift card payment option; those are some very impressive numbers for a payment method which has only been available since January 2011, even if they started testing the program in September 2009.

What's A Mobile Gift Card?

Mobile gift cards allow consumers to store gift cards on their mobile phone. In short, mobile gift card users can display a barcode on their smartphone's screen which can be scanned by the merchant. Starbucks is using both iPhone and Blackberry applications to store and display the barcodes. Here are some screen shots of the mobil gift card app:

From left to right: Barcode, Balance, Reload

Mobile Gift Cards Will Be Popular

You can bet the farm mobile gift cards will be popular in the future and they are here to stay. While the form of caring gift card information on your phone may change over time, this is a trend which will continue. Here are a some of the benefits of mobile gift cards:

1. It's always in your pocket.
2. You'll always know the balance.
3. Lost or stolen? No problem: the gift card is registered to your account.
4. Reload your card anytime, anywhere.
5. Access to your transaction history anywhere.

Those are some great benefits for consumers and it's easy to see why Starbucks' new payment option has been popular. In fact, I think it's time to start calling for mobile gift cards "mGift Cards".

mGift Cards Will Not Be For A Winner Every Merchant

While mGift Cards will be a popular option for consumers in the future, don't count on every merchant's efforts to be nearly as successful at Starbucks. That's because Starbucks' business model favors frequent use and the reloading of gift cards, a key attribute in maximizing the adoption of a mGift Card program. In short, people buy and reload Starbucks Gift Cards for themselves. Here are a few reasons why:

1. Starbucks Gift Cards are part of a loyalty program: 'My Starbucks Rewards'
2. Customers visit Starbucks on a weekly/daily basis.
3. Customers use the Starbucks Gift Card for budgeting their coffee expense.

Without frequent use and an incentive to reload, the value proposition of an mGift Card is greatly reduced. People will be less likely to download an application just to one gift card. However, if you are using the card on a daily basis and own a smartphone, downloading the app is a no-brainer.

mGift Card Reviews by ScripSmart

Currently there are no mGift Card reviews on ScripSmart. However, this is likely to change and while nothing is final, we'll likely review them as a separate product, similar to how we review Plastic Gift Card separately and eGift Cards as separate offerings. Congrats to Starbucks on putting together a successful program!

Oregon Gift Card Law: SB 756 Proposed Changes

Update: A new version of SB 756 passed the Oregon Senate in early May 2011, more detail here.

Lawmakers in Oregon are proposing some important changes to Oregon Gift Card Law. Sponsored by Senator Joanne Verger, SB 756 would make two changes to the current Oregon Gift Card Law:

1. All gift cards must be redeemable for cash (or check) if the balance is less than $10 and the card has been used at least once.
2. All gift card must be reloadable.

1. Redeemable For Cash: Great Idea

Requiring merchants to offer cash back for used gift cards with a balance less than $10 will definitely help make gift cards better for consumers. That's because there are very few companies who offer a cash back policy unless required by state law. In short, ScripSmart likes to see cash back policies because we don't believe consumers should be required to pay more than the original value of a gift card in order to receive the full value of their gift.

In fact, such cash back requirements are an important factor in determining the consumer friendliness of a state's gift card laws. If this item were to become law, it would push Oregon's State Law Grade form a B to an A. Cheers to Senator Verger for bringing this to the table.

2. Reloadable Requirement: Not A Great Idea

Oregon would be the first state to implement a law requiring all gift cards be reloadable. It's my understanding the motivation behind this requirement is not one of consumer protection, but environmental protection. The line of thinking is quite simple, perhaps too simple:

• plastic gift cards damage the environment when they are discarded,
• many gift cards are issued each year and 
• if gift cards were reloadable, less gift cards would be tossed into the garbage because
• consumers would be able to reload them instead of purchasing a new gift card. 

Frankly, I don't think this portion of the bill is a good idea. Here are some thoughts why:

Minimal Environmental Impact

Outside of using a gift card as part of a loyalty program, the reloading of gift cards is simply not very popular among consumers. Most of us simply receive a gift card as a gift from another person, redeem the item and disregard the gift card after the balance reaches zero. While there is a trend toward budgeting with gift cards, it's a very small portion of total gift cards usage. Most consumers are just not very interested in continuing to reload a gift card and tying up our money with a merchant.

The Wrong Place For Action

Protecting the environment is a noble cause and those who are forward thinkers should be applauded. However, there are many more uses for plastic cards other than gift cards: ID cards, credit cards, driver's licenses, library cards, membership cards and shopper discount cards to name a few. It's not quite clear to me why this is a good place for enforcing a law to protect the environment. In fact, the laws which SB 756 amends are listed under "Chapter 646A — Trade Regulation" and browsing through the chapter, I see no other legislation aimed at protecting the environment.

Oddly enough, and due to Oregon's definition of a gift card, it appears this law would also apply to eGift Cards which have no environmental impact and also apply to paper gift certificates which just doesn't make sense. Furthermore, phone cards and bank-issued gift cards (Visa, Mastercard logos) would be excluded from this law as would any other gift card "usable with more than one seller of goods or services".

For the record, here is the current definiton of a gift card according to Chapter 646A:

...“gift card” means a prefunded record evidencing a promise that the issuer will provide goods or services to the owner of the record in the amount shown in the record. “Gift card” does not include prepaid telephone calling cards, prepaid commercial mobile radio services as defined in 47 C.F.R. 20.3 or any gift card usable with more than one seller of goods or services.

Finally, the bill will "apply to gift cards sold on or after the effective date of this 2011 Act." In other words, there will be little notice to gift card issuers. If businesses have gift card stock with is not compatible with the new regulations, they'll have to discard the unused product which would result in even more waste.

A Suggestion

If Oregon law makers are interested in protecting the environment form plastic, they should enact a law which addresses plastic or at the very least, all plastic cards. I suggest looking towards the recycling industry for inspiration; perhaps plastic cards should be manufactured from recycled material or even biodegradable materials.

One Last Note

ScripSmart's State Law Grades do not currently factor in the notion of a state requiring merchants to offer reloadable gift cards and I'm not sure it ever will because I don't see a big benefit for consumers. However, a gift card program which is reloadable experiences a slight boost in it's Gift Card Score. Such an impact is rather small and given based on the belief: a reloadable gift card program is a more robust offering and gives the consumer more options in how they use the gift card. It's a nice to have, but not somthing most of use will ever use.

California Gift Card Law: The Cash Back Coupon

It's not much of a surprise when I hear of a consumer who is unfamiliar with their state's gift card laws. However, it's a much more concerning when a company who issues gift cards is unfamiliar with the gift card laws which they must follow.

I just read a rather humors article by consumer advocate Dennis Rockstroh. He's fed up with California companies who will not offering cash back for gift cards with a balance less than $10. In fact, he's so fed up, that he's created a printable coupon for consumers to take with them to the store in hopes of getting the a merchant to abide by the law and cough up the cash.

I agree with Dennis, it's rather ridiculous that a business is still unaware of a consumer protection law which was enacted over three years ago; and it's even worse when they stick to their guns and refuse to fork over the cash. While Dennis' coupon can't hurt, here are some more tips:

1) Ask to speak to manager. Be nice. They can also cut a check at a later date.

2) Quote the section code: 1749.5(b)(2) in the case of California.

3) Direct them to California's consumer friendlily gift card law website on your smart phone or a company computer with internet access.

4) Take down names, times, phone numbers and report it to your state's Attorney General.

Not Just Cash Back In California

California is not the only state with a law requiring merchant's give cash back for a gift card. Take a look at ScripSmart's list of states with cash back laws for an up-to-date listing of where you can get cash back for your gift card!

Amway Settles Gift Card Lawsuit - Daily Deal Sites Should Take Note

Amway Gift Cardhoders have been given another shot.

As the result of a California lawsuit, Amway has agreed to redeem or replace more than $20 million in gift cards which have gone expired, at least in the the minds of consumers. That's because Amway placed the words "redeem before" on gift cards sold to consumers. Naturally, it was argued such a practice violated California Gift Card Law which prohibits expiration dates.

While Amway still denies the use of "redeem before" implies the gift cards has an expiration date, they are clearly wrong. We can all see it would be completely reasonable for a consumer to look at a gift card with a "redeem before" date in the past and think of the gift card as expired. This was an extremely deceptive practice.

Groupon And LivingSocail Should Take Note

One can't read the result of this case and without thinking about a recently lawsuit filed against Groupon in California. It's very similar: a Groupon Voucher clearly states an expiration date and the lawsuit argues such an expiration in in violation of California Gift Card Law. However, buried in the Groupon's own terms, it's disclosed that the "paid portion" of the voucher might be governed by state laws and may not expire.

The Proper Way To Operate: Full Disclosure

While it's reasonable for the promotional portion of a voucher to expire, it's likely the paid portion is governed by gift card laws. I recommend Groupon, LivingSocial and other daily deal sites begin clearly disclosing the expiration dates and dollar amounts for both the "paid portion" and the the "promotional portion" directly on each voucher sold.

Gift Cards And Escheatment Laws

It's not uncommon for people looking at state gift card laws to ask: what does escheat mean? In this post, I'll cover some of the basics surround gift cards and escheatment laws.

In short, escheat is a common law doctrine that operates to ensure that property is not left in limbo and ownerless. Basically, a state will determine the type and time frame for property to be considered abandoned or unclaimed. It's the responsibility of the property holder to report and turnover the unclaimed property to the state.

Escheat laws make a lot of sense; they've been around for a long time and cover a wide range of property. From bank accounts, to stocks and even tangible property such as land. Once a state acquires the unclaimed property through escheatment, the rightful owner can claim the property from the state. In fact, many states have unclaimed property searches accessible online.

Do Gift Cards Escheat In My State?

Depending on your state's gift cards laws, they may fall under unclaimed property laws subject to escheat. In fact, some state's like New Jersey have very aggressive laws for claiming the value on gift card, just 2 years. Other states, like California have specifically stated gift cards are not considered unclaimed property subject to escheat. When evaluating a state's gift card laws, ScripSmart's algorithm lowers the state's State Law Grade when they considers gift cards to be unclaimed property. Here is a cheat sheet for gift cards and uncalimed property.

Why Does ScripSmart Think Gift Cards Should Not Escheat?

While it's understandable state lawmakers do not want a company who issued the gift card to benefit when gift cards go unredeemed, we think it's a bad idea to subject gift cards to such laws. Here are a few reasons why:

1. The true owner's address is often an unknown - Due to the nature of gift cards, the person who owns the gift card is rarely the person who purchased the gift card. In fact, they might not even live in the same state as where the gift card was purchased. This is problematic because states often define which property is unclaimed based on the owner's address and if that address is unknown, it's often assume the owner is within the state which it was purchased.
2. Turing the value of a gift card over to the state essential expires the gift card - Even if it's against state or federal laws to expire gift cards the value is no longer held by the card issuer. For example, New Jersey wants the money after just 2 years and that's 3 years shorter than the federal minimum for expiration dates (5 years)!
3. It's unlikely to be claimed - Because gift cards are gifts, it's unlikely the true owner can go to a the state and search by their name. This makes it difficult for the owner to claim the property from the state. In other words, the state is really the one who benefits from unclaimed gift cards, not consumers.

Suggestiong For State Laws

There may be instances where excluding gift cards as unclaimed propertyhurts consuemrs. For example, there are no states which require lost gift cards be replaced (even for a fee) and if a gift card becomes lost and the gift card issuer does not replace the gift card,that consumer is out of luck and will never have the option of claiming the money from the state.

Thankfully there are sevral companies out there who offer a reasonable replacement policy. And ScripSmart can help you find them, it's also a factor in each Gift Card Score. When looking at a gift card grid on ScripSmart, you can sort by specific attributes. Just click on the column header and look for green checkers. For example, here is a list of the best restaurant gift cards.