An insolvency specialist has explained how to safeguard what you have
Scanning a loyalty card for points and discounts
Millions of people are sitting on loyalty points and vouchers they have no idea could disappear without a single penny back. That’s the warning from an insolvency specialist, who says that with high street retailers collapsing at a significant rate the risk is greater than many shoppers realise.
According to the Competition and Markets Authority, 97% of shoppers are signed up to at least one loyalty scheme. But while those points feel like money in the bank, Molly Monks, insolvency specialist at Parker Walsh, warns that for many shoppers they could be worthless if the business behind them hits financial trouble.
The key question for shoppers is what happens to those points and vouchers if the retailer you earned them with suddenly collapses. Mrs Monks says the answer for most shoppers will come as a shock.
“Loyalty points and vouchers are essentially a liability on a retailer’s balance sheet, a promise to give you something in the future in exchange for your past spending,” she explained. “When a business enters administration or liquidation, that promise is not protected in the way most people assume.”
If a retailer goes into administration it can continue to trade, but the administrator can and often will refuse to accept vouchers. If it goes into full liquidation, assets are distributed in a strict legal order of priority and holders of vouchers rank as unsecured creditors, who are low on the list and typically receive little or nothing.
Loyalty points are in an even weaker position than vouchers. It’s very unlikely you’ll get anything back at all as there’s very little monetary value legally attached to them. Mrs Monks explained: “When a company collapses, the queue for its remaining money is long. Banks and secured lenders are at the front. Employees come next.
“Loyal customers with a points balance or a voucher saved up for Christmas are right at the back and, in most cases, there’s nothing left by the time it gets to them.”
She added: “Retailers are still under enormous pressure. Rising wage bills, energy costs and business rates all squeeze margins, and when a business is already struggling, it is often collecting loyalty scheme money right up until the doors close. Shoppers have no way of knowing how close to the edge their favourite store actually is.”
What shoppers can do to protect themselves
The good news is there are practical steps you can take to reduce your exposure. The most important: don’t let points and vouchers accumulate for too long. Mrs Monks advises treating them like a perishable item, the sooner you use them, the less you stand to lose.
She said: “There’s a temptation to save up loyalty points for a big redemption, a large shop before Christmas, a holiday, a treat. But the longer you leave them sitting there, the longer you are exposed to the risk that the business runs into trouble. Spend them little and often rather than banking them for ages.”
For vouchers with a fixed cash value, always check the expiry date and redeem them as soon as you reasonably can. If a retailer begins showing signs of financial difficulty, store closures, reports of losses or news of missed supplier payments, that’s the moment to use what you have, not wait and see.
A number of major brands have disappeared from the High Street recently, including The Body Shop, Carpetright, Quiz, Paperchase, Homebase, Claire’s Accessories and the Original Factory Shop, with 150 branches of TGJones looking set to close.
