Norm Silber: Consumers should use their gift cards in light of the coronavirus

Hofstra's Norm Silber, who studied gift cards and other merchant cash substitutes for his article, Merchant Authorized Consumer Cash Substitutes, 14 University of Virginia Law & Business Review (2019), urges consumers to spend their gift cards online. He points out that

[A] gift card always involves insolvency risks, but the problem has never been as serious as it is now– in the case of the coronavirus pandemic.  When consumers buy gift cards, they are usually making unsecured loans at zero interest to retailers. 

In 2015, they loaded $5 billion on to Starbucks cards, for example, a number has grown since then. The average consumer last year had outstanding loans to retailers that have been estimated at about $214.   A list of the popular gift cards includes many that are in little or no apparent danger; but there are many that may well be, especially if the imperatives of social distancing continue into the summer and fall—which appears extremely likely, sitting here now. 

Here is a list published not long ago in a WalletHub report:

Target; Walmart; Sephora; eBay; Home Depot; Ikea; iTunes; Starbucks; Costco; Chick-Fil-A; Netflix McDonald's; Fandango; Chipotle; Rei; Old Navy; H&M; Disney; Google Play; Best Buy; Macy’s; Lowe’s; Subway; Amazon; Gamestop; Nordstrom; Nike; Kohl's; T.J. Maxx; Apple Store; Cabelas; Visa; Ticketmaster; Whole Foods; Forever 21; Applebees; Olive Garden; Taco Bell; American Airlines; JCPenney; Texas Roadhouse; Red Lobster; Cinemark; Michaels; American Express; Mastercard; Dunkin Donuts; Hobby Lobby; Etsy; Shell

My suggestion is for consumers to spend their gift cards online—and as soon as possible in the case of companies whose profitability depends on social intimacy.  Doing so will also help the retailers.

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