A new study has found that many consumers are unaware of the risks associated with gift cards, particularly the possibility of losing the funds if the retailer goes out of business. Researchers discovered that almost half of those surveyed were not familiar with the laws protecting consumers in the event of a retailer’s bankruptcy.
The study, conducted by researchers at the University of Notre Dame’s Mendoza College of Business, revealed that many consumers are unaware that gift cards are treated as unsecured debt in bankruptcy proceedings. This means that if a retailer files for bankruptcy, gift card holders are considered creditors and may not receive a refund for the remaining funds on their cards.
The lack of awareness surrounding this issue is concerning, as the popularity of gift cards continues to rise. According to the study, over $130 billion in gift cards were sold in the United States in 2020 alone. With the ongoing economic uncertainty brought on by the COVID-19 pandemic, the risk of retailers going out of business has only heightened.
In light of these findings, the researchers recommend that consumers take proactive steps to protect themselves when purchasing gift cards. This includes using gift cards promptly, checking the financial health of the retailer, and keeping track of any bankruptcy filings that may affect the retailer in question.
Overall, the study highlights the need for greater consumer education on the risks associated with gift cards and emphasizes the importance of understanding one’s rights as a consumer. By taking precautionary measures, consumers can better safeguard their funds and avoid potential losses in the event of a retailer’s bankruptcy.
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