Why gift vouchers make a bad Christmas present

by Emma Lunn on 15 December 2011  |  11 comments
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Gift vouchers are a tried and tested present for those friends and family that are tough to buy for. But in the current climate, they aren't so smart.

Back in the day gift vouchers were the fallback option for present-buyers everywhere. If you were stuck what to get a troublesome teenager or the man who has everything, gift vouchers (or gift cards) presented a more socially acceptable solution to cash. But are they such a good idea these days?

In short, no.

The past couple of years have seen numerous high street retailers go bust. The latest retailer to go to the wall is Barratts and Priceless shoe stores. The past week has also seen Britain’s largest outdoor retailer Blacks Leisure, which owns Millets, put itself up for sale.

Other stores that have gone into administration this year include Habitat, Moben, Jane Norman and several holiday firms. Recent years have also seen high street stalwarts Woolworths and MFI go under. So, who’s next? I could take a guess but the truth is no one knows.

And there you have the trouble with gift vouchers…

Is the retailer stable?

If you’re thinking of buying gift vouchers for someone else, or putting them on your own Christmas list, you should double-check the security of the retailer first.

Put simply, if the retailer goes bust, gift cards and vouchers for that company are likely to be worthless. The recipient will be unable to spend the voucher and the buyer will be unlikely to get their money back.

In theory, voucher holders could lodge a claim with the administrators, but they would be well down the list of creditors.

Changing the rules

Even where a troubled firm is taken over, or holding a final clearout sale, changes to terms and conditions can make gift cards and vouchers difficult to use.

For example when women’s clothes store Jane Norman went bust in July, the administrators changed the terms and conditions on gift cards for the store. The new rules meant consumers could only spend the cards on full price items, and the total spend had to be twice the value of the gift voucher.

Similarly when Borders went under in 2009, customers had to match their voucher with the same amount to use it in the store’s final sales. So if you had a £20 voucher you had to spend another £20 of your own money on top, just to use it.

And when Zavvi went bust a few years ago administrators simply refused to honour gift vouchers in the final “clearout” sales.

Unfortunately, although it might not seem fair, retailers are within their rights to do this. Under insolvency law, the terms and conditions of gift cards can be revised when a company goes into administration.

Other small print

Retailers going bust aren’t the only thing you have to worry about when it comes to gift vouchers. If you can’t see an expiry date on any gift voucher or gift card you buy, don’t assume that means it doesn’t expire. Some are valid forever, but not all. Amazon gift cards, for example, are only valid for one year while Marks & Spencer gift cards are valid for four years.

So check the terms and conditions if you’re buying vouchers for other people and make sure the recipient is aware of them.

Surprisingly some stores don’t let you use gift vouchers or cards online. H&M and Topshop don’t allow vouchers to be redeemed on their websites, for example.

Newly-weds often have issues with vouchers too. In some cases, if a pre-selected gift isn’t available a store will give the couple vouchers instead, but limit what these can be spent on. Marks & Spencer, for example, won’t allow gift cards to be spent on white goods.

Take precautions

If you’re still keen on gift vouchers then do some research on the company first. A quick search online will give you a clue as to how a company’s doing. Any profit warnings or reports of debt refinancing (as Thomas Cook was doing a few weeks ago) should set the alarm bells ringing.

Also, check if there are hordes of other customers complaining about non-delivery – that’s not a good sign.

If you’re spending more than £100 on the gift vouchers, then using a credit card for at least part of the payment may give you extra protection under Section 75 of the Consumer Credit Act.

Under this protection, a credit card company is jointly liable if something goes wrong, so it may reimburse you the cost. However, this protection isn’t definite as each administration is different and it’s unclear as to whether this law will apply.

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