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What Happens to a Store Card if a Retailer Goes out of Business?

It’s been troubling times for retailers recently, with many companies struggling financially. Sadly, firms such as Debenhams, Laura Ashley, and Monsoon have all either announced administration or substantial job cuts.

If you have a store card for a company which has declared bankruptcy though, you might be wondering what happens to your debt. While you might believe it’s written off, this unfortunately isn’t the case. Read on to find out what could happen to your store card debt.

Has the business actually closed?

First, it’s worth making sure the business has filed for administration before doing anything drastic. Furthermore, when a retailer goes bust, the store won’t disappear overnight. There are a lot of things the company must do before wrapping up.

However, the firm might choose to keep trading under a different name, through a sister store, or just move its products completely online. Even if a company does announce administration, it might also be bought out so you may not want to cancel your account just yet, it is worthwhile checking first and considering your options.

If the retailer is closing its doors, you should receive notice from the company concerning your account. Although this depends on the retailer and the circumstances, here’s an overview of what may happen:

Will my store card debt be written off?

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Although you may initially assume your store card debt will be written off, you’re actually still liable for what you owe. This is because retailers generally issue store cards through third-party financial companies. Therefore, your debt isn’t with the store but actually with them.

This means, it’s business as usual. Interest rates and charges will still apply and the amount you owe will be unchanged.

If the retailer owned your debt (which is possible but unlikely) you will still have to pay what you owe. Once a company goes into administration, its assets are up for grabs. Therefore, another company will usually buy your debt and you’ll need to pay them.

What happens to my rewards/benefits?

If a retailer goes into administration, the company should send over details regarding how long you have left to redeem any rewards or benefits. Once this date expires, these bonuses will be rendered void.

However, it’s also possible your rewards could be valid in sister stores or could be used through e-commerce if the company is moving online, so check with the company.

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