MW What happens to gift cards when a chain like Joann or Dollar General closes stores? Here's what shoppers can do.

By Weston Blasi

Fabrics giant Joann is closing, and the store has stopped taking gift cards - upsetting many customers. Here's what shoppers should know.

Americans spent over $300 billion on gift cards last year - but these popular presents can become risky bets when their assigned retailer goes out of business.

That's the case playing out right now for fans of Joann Inc. The fabric and crafts retailer filed for Chapter 11 bankruptcy protection in January, and announced that it would be closing all of its stores. But like many retail chains that shutter their outlets, the actual closing process doesn't happen overnight. So customers can often try to make the most of the situation by shopping liquidation sales and grabbing products at discounted rates.

Customers banking on using Joann gift cards at any going-out-of-business sales have been met with bad news, however. Not only is Joann no longer taking online orders, but many customers say they've been told that their gift cards will no longer be accepted, prompting many to complain on social media.

"Why aren't you accepting gift cards when you already received the funds when the gift card was purchased??!!" one X (formerly Twitter) user posted.

"Used to grab fabric there for school projects-now I'm holding a $20 gift card that's trash," another X user posted.

Representatives for Joann did not respond to MarketWatch's request for comment, but its website has a "frequently asked questions" section, stating that gift cards wouldn't be accepted after Feb. 28.

Considering the numerous store closings already announced this year, including some Macy's (M) and Dollar General $(DG)$ locations, as well as some Walgreens $(WBA)$, Party City, Forever 21 and Michaels stores, customers are probably looking at the Joann fallout and wondering what happens to their gift cards and coupons if a store closes, or how long a business has to honor them.

The Joann bankruptcy can be a learning experience on how to manage gift cards properly.

Related: Americans spend $300 billion a year on gift cards. Why some experts say they should stop.

"It's always important to use your gift cards right away," Shelly Hunter, consumer gift-card expert and director of communications at e-Gifter, told MarketWatch. "The longer you hold on to your gift card, the higher the likelihood that you will lose it, or simply forget to use it. And that's when a store closure could impact you."

Hunter said that bankruptcies can lead to a cutoff date for your cards. "When a company goes through bankruptcy proceedings they often transfer assets to a liquidator, and when that happens they may not be accepting gift cards," Hunter said.

When people learn that a retailer or restaurant is closing, and remember they have an unused gift card for that place, one might think these customers would use their soon-to-be-expiring card. But that's not always what happens. Hunter has noticed that people like to save their gift cards until the liquidation sales escalate - which does often happen. A liquidation sale could start at 10% off storewide, move up to 30% and then spike to 70% before the place closes, and so some people try to time it just right.

But that could be a bad idea. "Don't wait and think you're going to get more money, or wait for the 70% sales, it could be too late," Hunter said. "Some people will want to wait for 70% off, and that's a big mistake."

One thing to keep in mind: It's rare that every store closes at the same time. And you never know when your nearest outlet is getting shut down. "It might take them six months to close all stores, but the one in your neighborhood could go first," Hunter said. "You want to go as soon as possible to redeem your gift card."

So what if you're holding a Joann gift card that you can't use, or you've got one for another company that's involved in bankruptcy proceedings? There could still be a few options for you.

Related: 7 ways to safeguard your money as the Trump administration weakens consumer protections

A person could file a claim with a bankruptcy handler, which is typically referenced on the company's website. In that case, creditors who are owed thousands of dollars will likely get paid first, but it's possible your claim could get reimbursed afterward. In some cases, courts could extend gift-card dates, too.

Some states' consumer protection agencies have also been posting on social media to help organize customers' claims in hopes of recouping lost gift-card value.

This isn't the first time that customers have complained about being left holding onto unusable gift cards. MarketWatch's Charles Passy reported that restaurant chain TGI Friday's had nearly $50 million in outstanding gift cards when it filed for bankruptcy last year, highlighting how holding onto gift cards can sometimes be perilous. Luckily for TGIF customers, the chain is still accepting gift cards as it reorganizes financially, and the chain is not going out of business.

Some companies have massive amounts of outstanding gift cards that customers haven't cashed in yet. Coffee chain Starbucks $(SBUX)$ said last year it had as much as $1.77 billion in unredeemed gift cards. A 2024 Bankrate survey showed that about 43% of American adults have at least one unused gift card.

So even if you have a gift card for a brand that you're not particularly interested in using, Hunter suggests getting your money's worth by going and buying something anyway.

"Maybe there's not merchandise you want, but that's a great opportunity to go into the stores, and buy stuff you can donate," Hunter said.

-Weston Blasi

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March 14, 2025 08:45 ET (12:45 GMT)

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