Gift cards that are safe from retailers going bust

HMV, 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.

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.

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.

More from Lovemoney:

Why gift vouchers make terrible presents

Financial Ombudsman Service: how to complain to the FOS

Get the American Express Preferred Rewards Gold Card fee free for a year