In today's Money Monday, we have two hot issue: One concerning gift cards, another involving something called "skip a payment."
First, gift cards. They're a hugely popular gift, but what do you do when the gift card you have is for a store that goes belly up?
After we did our story on gift cards last week, we got questions.
"I have gift card from a store that closed after someone gave the card to me," Elie Pitts asked on Facebook. "Any suggestions what to do with it? Is the money just lost forever?"
It depends because when you buy a gift card, you're basically giving the retailer an unsecured loan until you redeem it. If the business files for chapter eleven or bankruptcy reorganization, everything gets frozen and the retailer must ask a judge for permission to honor gift cards. Radio Shack just went through this.
If the business files for Chapter 7 liquidation, then you have to get in line with all the other creditors who want money. Consumers are usually at the back of that line and you may get pennies on the dollar.
"So a going out of business sale might be good to snag a good deal but not a good time to snag a gift card for someone you love," Fort Worth Better Business Bureau's Lindsey Haase said.
Even more complicated is when some businesses are bought out during reorganization. The buyer is under no obligation to honor the old business's gift cards.. even if the company carries the same name. It's yet another reason to cash that card as soon as you can.
Skip A Payment
Around the holidays, we could probably all use a little extra cash. What if you could just not pay a bill for a month?
That's actually an option landing in some mailboxes this month, called skip a payment. Many times, it's offered during December on things like installment loans for your car or a credit card. Maybe you've received one of the offers already.
Financial experts caution to think carefully before you consider doing it.
"Make sure that this is not like a freebie," certified financial planner Katie Brewer said. "You don't just get to skip a payment and then start back on your loan where you left it off, it actually gets added in to the end of the loan."
That means you'll have to pay more in interest, which could be a lot depending on how much you're paying off. Plus, it lengthens the term of your loan. Sometimes there are also fees involved.
Some experts say they see more delinquencies in January. People who skip a payments in December may get out of the habit of paying regularly.
Bottom line: Read the fine print. If you do decide to skip a payment, another expert suggests using your tax refund to make an extra payment to get you back on track.