I don’t buy gift cards, unless I am gifting them in small amounts. A recent bankruptcy illustrates why you should also be careful about ever stocking up on gift cards.
First, perhaps, we should take a step back. The whole “manufactured spending” (MS) game has never appealed to me. Sure, the amount of points on the table was alluring, but that game requires far too much organization and far too much risk. There’s ethical implications as well. While I don’t see anything wrong with MS, many banks did…and shut down accounts.
But the idea of buying gift cards at office supply stores using Chase INK cards to get 5x points per $1…I can see why it made sense for some people.
But what happens when a company goes out of business? Short answer: those gift cards become worthless.
The Souplantation chain went out of business over the weekend. I’ve enjoyed this salad bar chain since I was a kid and have many happy memories of lunch and dinner with friends and family in this place. But salad bars and COVID-19 do not exactly mix and the chain’s 97 restaurants have been shut down for several weeks. With even curbside takeout virtually impossible, Souplantation announced it was declaring chapter 7 bankruptcy (liquidation) and closing for good:
CEO John Haywood told he LA Times:
“The FDA had previously put out recommendations that included discontinuing self-serve stations, like self-serve beverages in fast food, but they specifically talked about salad bars and buffets. The regulations are understandable, but unfortunately, it makes it very difficult to reopen. And I’m not sure the health departments are ever going to allow it.”
Even in Georgia, which has re-opened, buffets and salad bars are still prohibited. That does not bode well for the future of buffets.
Worthless Gift Cards
Referring to its outstanding gift cards, Souplantation said:
For gift card inquires, refund options are limited at this time. You may be able to dispute the purchase with your bank or credit card company. Otherwise, there may be an alternative option available through the court in the future.
A court-appointed bankruptcy trustee will now sell Souplantation assets, which may raise some money for gift card holders (pennies on the dollar) depending upon the relative position of other creditors.
Should You Buy Gift Cards At All?
I’m not going to tell you not to buy gift cards. That’s far too broad of a recommendation. But stockpiling gift cards seems like a dangerous game considering they can be lost and as we see here, companies can go out of business. Better, as an overall strategy, to put purchases on flexible currency or cash back cards and only use gift cards for gifts…
The sad thing is that many saw buying gift cards during COVID-19 as a smart way to prop up struggling restaurants. While that was logical in theory, the case of Souplantation demonstrates the danger of such an approach.