Sears bankruptcy: What you need to know about credit cards, gift cards, warranties


Since the company that owns Sears and Kmart filed for bankruptcy in the fall, many customers are wondering what’s going to happen to their Sears store credit cards, gift cards and warranties if the company is liquidated.

What happens to my Sears credit card?

We’ve written about how owning a Sears or any store credit card is generally a bad idea, but what happens if have an open credit card with a chain that closes all of its stores?

If all of Sears’ stores close, there is precedent that may still exist. That means Sears credit cards could still be valid and accepted there. Radio Shack went under in 2017 and its website is still up and running — as is ToysRUs. The point is that a store’s physical closure doesn’t necessarily mean it’s out of business.

The main thing to know is that if you have a balance on your Sears card, you’re still liable for it. The reason for that is because the issuer of the credit card was never the store itself, but a bank, the underwriter of the loan.

You’ll want to pay the card balance off as quickly as possible so as to avoid any delinquency fees, which could ding your credit report. See more about what might happen to your Sears credit card here.

What happens to my Sears warranties? Are they still valid?

For decades, Sears has offered an appliance warranty on brands like Whirlpool, Craftsman and the such that has literally kept millions of American homes running smoothly.

Sears has said that it will honor all warranties as long as it remains in business. Unfortunately, during the liquidation process, that guarantee withers away.

Sears and Kmart patrons need to be aware that they’ll likely lose any consumer protections, including those held under warranties, when and if the stores go under.

It’s worth noting that money expert Clark Howard is not big on buying extended warranties at all. In fact, he says this: “When should you buy an extended warranty? Never, ever on appliances or electronics.”

Clark says too many consumers see very little return on extended warranties. “Salespeople will tell you that an extended warranty ‘protects your investment.’ But a TV, a washer or a DVD player is not an investment.”


What happens to my Sears gift cards?

If you have any Sears gift cards, it’s best to try to use them as soon as possible. You may keep a gift card for a number of months just because you feel you have time to dilly dally. For Sears and Kmart gift card holders, the time for dilly dallying is over.

The Federal Trade Commission (FTC) says that when Toys R Us went under, it clearly communicated to customers an expiration date for its gift cards. With Sears struggling to survive, the store has yet to address the future of theirs.

Although there is precedent for gift cards being protected in a bankruptcy, with liquidation all bets are off.

Again, Clark is no fan of gift cards in general.

Sears bankruptcy: What happens next?

Sears’ ultimate fate could be known as soon as Monday, January 14. That’s when an auction for the company’s assets is set to begin. A last-minute proposal by Sears Holdings’ Chairman and majority investor Eddie Lampert could keep more than 420 stores and about 50,000 employees working.

The very best hope for Sears and Kmart lovers at this point is that customers would get a decidedly streamlined version of those stores, if they remain open at all.

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