Gift cards that are safe from retailers going bust

Money giftHMV, Jessops, Comet, Blockbuster, Game, JJB Sports – the list of retailers that are going bust continues to grow. Many of these stopped taking gift cards either for good or while they struggled with the early stages of going into administration.

Although HMV has now decided to start taking them again, the warning from Comet is that HMV stores could still suddenly close, leaving cardholders with nowhere to spend the gift cards.
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Multi-retailer gift cards
The One4All gift card is one possible solution, although it comes with catches.

It's accepted at dozens of retailers in the UK. Don't confuse retailers with outlets: the website mentions "17,000 outlets", but this number means every WH Smith shop, every River Island or B&Q store, and every branch of all the other retailers included on the scheme.

Scanning the list of retailers included in this card, I see a good number of shops that I wouldn't necessarily associate with the lowest prices, but if you look for yourself you might find enough retailers that are of interest to you.

The price of a multi-retailer gift card
Although the One4All gift card is available on the internet, it only makes sense to buy it from a Post Office branch. Otherwise, you're going to give away more money in the form of a 99p delivery fee.

One cost buried in the small print is a £7.50 charge for closing the card and asking for your money back (for which you must call an 0870 number to do so, which could potentially be expensive).

Another charge is 90p per month from the 19th month until (or unless) you have spent all the money on the gift card completely. The final charge mentioned in the contract is £5 to replace a lost or stolen card.

You'll need to keep up-to-date on your card balance so you know how much you have left to spend in stores. You can do this for free on the One4All website.

I have looked at two other multi-retailer gift schemes, but both come with compulsory costs on top of the gift money itself. Therefore in my view you should probably avoid Love2shop and Bonusbonds. Please comment below if you know of any more multi-retailer options.

It just takes one company to go bust...
The One4All card still doesn't get safely around all the problems of a single company going bust.

The issuer of the card is Bank of Ireland, the Irish high-street bank. If Bank of Ireland goes bust and refuses to pay for gift card purchases, you won't be compensated by the Financial Services Compensation Scheme or any other government compensation scheme.

Currently, the policy of the Irish government, like most governments, is to save high-street banks at all costs, but governments and taxpayers can't afford that policy in all circumstances, so you could find yourself in the same position as if you had bought a gift card from an individual retailer that becomes insolvent.

One positive thing about this card being issued by a bank is that you can complain to the free Financial Ombudsman Service for compensation if you feel you've been treated unfairly. Read Financial Ombudsman Service: how to complain to the FOS.

Individual gift cards are still better
I still think buying a gift card from a specific individual retailer makes more sense a lot of the time, provided you know the recipient regularly chooses to shop there and you're confident the retailer is financially healthy.

That latter point is normally easy to judge: start running your eye down the headlines in the business section of your favourite newspaper or news website once a week. If you had done this over the past few years, you would have been aware that most or all of these failed retailers were in trouble, or likely to be in trouble, largely due to competition from the internet.

Even better alternatives
Whenever I research this, I find that retailers that join or create any kind of gift or reward schemes are usually (but not always) more expensive than other shops or online shops. That might be why so many of the individual retailers offering gift cards have gone bust recently – they can't compete with the internet. That's a warning in itself about buying gift cards.

I, and others I know, have made and decorated our own gift cards. In addition to naming the store or item that the card is intended for, you can write in your "small print" that it is redeemable on anything else of the recipient's choice. Making your own gift card doesn't just make the card safe from retailer bankruptcy; it shows you have put in a bit of effort and the recipient can choose a better, cheaper or more favoured retailer than currently offered by gift cards.

You could avoid the need to choose gift cards altogether by keeping a record of what your friends and family say they like, writing it down as soon as they mention it. This ensures you have plenty of ideas for buying proper gifts by the time Christmas comes around again.

Also, I don't see what's wrong with just asking someone what gift they want if you're unable to come up with a good idea yourself.

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High Street casualties
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Gift cards that are safe from retailers going bust

Administrators sounded the death knell for Woolworths in December 2008, leading to store closures that left 27,000 people out of work. Since its collapse former Woolworths stores have become a blight in many town centres and more than 100 of the large stores still lay vacant in January 2012.

Loyal customers didn't have go without the family favourite store for long however as it reappeared online as Woolworths.co.uk in 2009, after Shop Direct Home Shopping bought out the Woolworths name.

The greetings cards specialist became the latest highstreet casualty in May with 8,000 jobs on the line when it was forced it into administration. Its biggest supplier, American Greetings, then bought Clintons out of administration and put the retailer through a rebrand including a new logo and complete in-store revamps.

Its contemporary format includes new fixtures and fittings and easier to navigate stores, and will be rolled out to all 400 UK stores at the cost of £16million. Bosses aim to bring the brand back to profit within two years.

Poor sales in the run up to Christmas was the final nail in the coffin for several struggling chains, including lingerie retailer La Senza, which went bust in January 2012 with 146 shops and 2,600 staff. Kuwaiti retailer Alshaya bought part of the business, which saved 60 shops and 1,000 staff.

La Senza has been struggling in a similar way to other specialist shops such as Game and Mothercare, which have been hit by cut-price competition at supermarkets and have no alternative products to help shoulder losses.

Stricken retailer Blacks Leisure, which employed 3,600 staff across 98 Blacks stores and 208 Millets stores, went into administration in Janurary 2012 after failing to find an outright buyer.

Soon after its stores were bought by sportswear firm JD Sports in pre-pack deal - an insolvency procedure which sees a company being sold immediately after it has entered administration – which saw most of Blacks' £36 million of debt wiped out.

Fashion chain Bonmarche, which was part of the Peacock Group, was sold in January when the group collapsed due to unsustainable debts, resulting in 1,400 job losses and 160 store closures. Private equity firm Sun European Partners bought 230 stores, which continue to trade with 2,400 staff.

Peacocks collapsed under a £740 million net debt mountain in January 2012 in the biggest retail failure since Woolworths. Despite being sold out of administration to Edinburgh Woollen Mill in a deal that saved 380 stores and 6,000 jobs, administrators from KPMG were forced to close 224 stores with immediate effect. This lead to 3,350 redundancies from stores and Peacocks head office in Cardiff.

The high street name continues trading as bosses work to stabilise the situation, yet a further blow was dealt this month with news that the firm's pension fund is in £15.8 million shortfall as a result of the collapse.

Game buckled under its £85m debt pile in March 2012 and was placed into administration after being unable to pay a £21m rent bill. Administrator PwC immediately closed 277 shops, with the loss of 2,000 jobs. Soon after, investment firm, OpCapita bought 333 Game stores, saving more than 3,000 jobs.

Game's demise followed a string of profit warnings and the failure of nervous suppliers, including leading names Electronic Arts and Nintendo, to go on providing the latest games, further damaging poor sales.

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