Forget gift cards; give cash or hugs

Circuit City tried to reassure shoppers and employees alike on Monday that it would be business as usual despite its Chapter 11 bankruptcy filing.

The electronics retailer has asked a bankruptcy court to let it honor gift cards, returns, exchanges, warranties and the like. It also pointed out that its Circuit City-branded credit cards, which are offered through Chase, would still be honored. And its extended warranties, also offered through a third party, would be in effect based on the terms of their contracts.

Bankruptcy courts usually allow stores to honor all their customer service programs, so it seems as if shoppers have nothing at all to worry about.

Or maybe they do. Tony Giorgianni, an associate editor at Consumer Reports, says be cautious.

"They're trying to restructure and we certainly don't want to see anyone go out of business but ... take into account the fact that this is a retailer in serious financial trouble. That affects gift cards, warranties, return policies, refunds, exchanges."

He points out that Linens 'N Things first filed for Chapter 11 and is now in Chapter 7. Linens 'N Things has obtained court approval to honor gift cards but is liquidating its merchandise and closing its stores.

"What are you getting?" Giorgianni asks. "Broken lamps, hangers off the shelves?"

So if you have a Circuit City gift card, should you rush in today?

"Use it yesterday," Giorgianni says. "Anything you have, any credits, exchanges and returns, now is the time. In fact, do that across the board with any retailer, with any bank where you have a prepaid Visa or Mastercard. ... Whatever the obligation is, in this environment, use it now."

As someone who has a whole slew of gift cards to give this year -- and who just advised readers to turn their reward points in for gift cards -- Giorgianni made me feel a tad guilty. But to be fair, he has real issues with certain things in general like extended warranties ("they're not worth it") and gift cards.

He thinks that these industries, banks, retailers, credit card companies should make sure such items are protected.

"They take your money as a pledge against something in the store and then that money, in a bankruptcy, is going off to Joe the plumber, or some other secured creditor, who has priority over a gift card holder."

So no gift cards this year?

"It's always a good year not to buy a gift card," he said. "I'm not sure what the benefit of them is anyway. They're not like a real thing the person wants, they're not as good as cash. ... Cash you can use. Uncle Sam is probably not going to file bankruptcy.

"If you're buying presents ... offer to wax someone's car, get them something they really need, or just hug 'em. That's what the holiday is really supposed to be."