Lost in the Gift Card Graveyard

A San Diego company that sold gift cards to restaurants suddenly closed, and customers are left wondering what will happen to the money they still hold on those cards. The company, which had its cards sold at a major retail chain, announced it would file for Chapter 7 bankruptcy. It also told shoppers that the cards were no longer valid, but did not explain how much money was still locked up in unredeemed balances or why the business could not meet its promises. Gift cards are essentially a promise of future goods or services. When you buy one, the merchant gets cash right away but cannot record revenue until the card is used. In California, cards do not expire and sellers cannot charge a fee while they sit unused. However, if a business goes under, the card often loses value after a short grace period. The company had partnered with several restaurants across the country, and those eateries paid a marketing fee to participate. It was expanding into new markets when the bankruptcy filing came. When a firm folds, it usually gives a brief window for remaining balances to be spent; after that, customers have no legal recourse.Some retail outlets that sold the cards began refunding them, but many did not respond to inquiries. History shows a pattern: when well‑known retailers close—think Toys R Us or Sears—gift cards lose their worth. Even after a store announces its shutdown, the deadline for using cards is critical; once it passes, those balances are typically void. Because gift card holders rank low among creditors in a bankruptcy, they are unlikely to recover their funds. Occasionally, competitors will offer discounts to customers who trade in cards from a failed rival, but this is not guaranteed. In 2024, nearly half of Americans reported having unused gift card balances, averaging about $250 per person. To avoid losing money on a future purchase, it is smart to keep track of card balances, use them before any announced deadlines, and consider redeeming or transferring them to a more stable retailer if the issuer shows signs of trouble.