Gift cards remain popular despite pandemic, but come with a risk if store closes

Photo: The Canadian Press

Chris Corson has soured on gift cards this holiday season after the store she planned to spend them at was one of the growing casualties of the COVID-19 pandemic.

Swimco went bankrupt in October after 45 years in business, leaving Corson with $328 of worthless gift cards the Calgary-based company refused to accept before it shuttered stores.

"I would not recommend buying or gifting gift cards to anyone," she wrote in a message after posting her frustrations on Twitter.

"Swimco had the nerve to message me somewhere that a lot of gift cards never get redeemed anyways."

Gift cards remain a tradition at Christmas and are increasingly popular as more Canadians shun stores to avoid catching the virus.

About two per cent of gifts this holiday will be given in the form of cards, according to a Retail Council of Canada survey.

"It was clear that many consumers anticipate spending part of their budget on gift cards and specifically this year because many people are not able to get together physically for the holiday season," said council president Diane Brisebois.

Buying gift cards can be risky, however, as a number of retail chains wind down their businesses in the face of reduced mall traffic prompted by the pandemic.

Insolvent clothing retailer Le Chateau, for example, says it will only accept gift cards until Dec. 3 as part of its liquidation.

"Holding onto gift cards could bring uncertainty to most Canadians because what happens when you buy a gift card is you are pretty much giving the company a loan," said Alex Don, president of the National Canadian Lawyers’ Initiative, which is providing free legal advice to people and businesses struggling during the pandemic.

Gift card holders become unsecured creditors during insolvency proceedings that result in liquidation and are unlikely to secure any refund.

While many gift card purchases are made at large retailers, it's the smaller stores that are most affected by COVID-19 and in most need of extra cash flow.

Retail analyst Bruce Winder suggests consumers can instead help their local merchants by making purchases.

"It's kind of unfortunate, but there is a risk, a higher risk with small- to medium-sized companies that they just might not be here in January or February," he said in an interview.