'You have to be a vigilant consumer': Gift cards worthless when stores go out of business

As customers of Spareparts found out last week, gift cards are unusable when a store goes out of business. Here's how to protect yourself from a similar situation.

Better Business Bureau Saskatchewan urges people to do some research before buying gift cards

If a business closes, gift cards usually become worthless. (Michael Conroy/The Associated Press)

As people finish their Christmas shopping, gift cards can help fill in the blanks — but they can also pose a risk to the buyer.

As customers of Spareparts found out last week, gift cards are unusable when a store goes out of business.

When the Saskatoon-based sunglasses and accessory chain went into receivership on Tuesday, people who had purchased prepaid cards in advance of the holidays were out of luck.

Regina customer Brooklyn Leibel recently bought $300 worth of gift cards to the store.

"I don't know how they were still selling gift cards that now have no value," she said.

Karen Smith, CEO of the Better Business Bureau (BBB) Saskatchewan, said it happens quite often.

She urges people to research companies before purchasing gift cards from them. For instance, a business is much more likely to be successful if it is at least five years old, she said.

To find out more about a business, Smith said customers can go online, read reviews and contact the BBB to find ratings.

Quick tips on buying gift cards:

  • Buy gift cards from a reputable source.
  • Research companies prior to gift card purchases.
  • Buy gift cards using a credit card for protection.
  • Use gift cards as quickly as possible, although they do not expire in Saskatchewan.

"You have to be a vigilant consumer. Watch the news. See what's happening," she said.  

"If you can't find a business that you're interested in knowing more about, then give us a call and we'll do an investigation."

Gift cards fall under the Consumer Protection and Business Practises Act in Saskatchewan and have no expiry date.

The Financial Consumer Affairs Authority recommends that consumers pay for gift cards with a credit card, which can sometimes help recover money lost if a business goes under.

Customers can file an official complaint with the Consumer Protection Division if they are having trouble redeeming a gift card from a business.

The number of people who are left with unusable gift cards in Saskatchewan due to business closures is unknown, as the information is not tracked by the provincial government.