December 5, 2023

Following Bed Bath & Beyond, the discount home improvement retailer announced Tuesday morning that it will cease operations and close all stores. While an exact date for store closures has yet to be set, the impact on Tuesday Morning gift card holders will be immediate.tuesday morning website Provide full details on its store closures and immediate changes in retail locations. Gift cards and merchandise return cards will be redeemed by May 13th.

Recent news has highlighted a double problem with the use of prepaid gift cards. Although my recent Javelin Strategy & Research Report Highlights About Unused Funds Most consumers use their gift cards within a month of receiving them, and often on a shopping trip, a large percentage of consumers have excess balance after 12 months, even if it’s just A fraction of the value of the initial card. Plus, hidden gift cards—in the form of merchandise points—often add up and become a secondary consideration when using Pay.

For consumers, the laws governing bankruptcy dictate the order of who gets paid back. The absolute priority rule determines the order of payment, with the secured creditor having priority for full payment. The remaining funds are then cascaded down the hierarchy, through secured claims in the order of issue, and then transferred to unsecured creditors, and then any equity holders can get paid if funds remain.This is coming from O’Brien LLP:

“Under the absolute priority rule, claims at the bottom of the said hierarchy should receive no payment from the debtor until the claim at the top has been fully recovered. Due to this process, the right holders at the bottom often receive no money or even to the money. Under U.S. bankruptcy law, this hierarchy is a ‘fair and just’ plan for creditors.”

Looking ahead, other potential bankruptcies and liquidations may be imminent, with recent news that david’s bride, party city, and others. Consumers who frequent these retailers should be vigilant and spend their remaining gift and merchandise credit balances as quickly as possible to ensure they maximize their funds. Gift card providers, rewards management organizations, and others must also carefully consider which retailers to focus on and offer to ensure their customers have a vibrant selection of options with limited ongoing risk to the intended ultimate card recipient.

The vast majority of gift card usage will continue to be unaffected by the current potential liquidation, and consumers can feel confident using any gift cards they hold. In general, retailers currently in bankruptcy or bankruptcy are using far less gift cards than larger, more stable retailers.For example, Tuesday Morning reported an accrued remaining gift card liability of just $1 million for FY 2021 annual report. As a counterattack, Target Debt outstanding for both FY 2021 and FY 2022 exceeds $1.2 billion, indicating much larger usage and balances of gift cards, the report said.

Javelin Strategy & Research backs this usage, with consumers preferring big box retailers like Target or Walmart, and big online retailers like Amazon or eBay. In addition, research shows that other popular gift card usage occurs at food and beverage retailers such as Starbucks, McDonald’s, or Chick-Fil-A – these retailers often use gift cards, and the gift card values ​​associated with lower price points Also lower.

overview Jordan HersfieldDirector of Prepaid Advisory Services, Javelin Strategy and Research.