Shoppers entering and leaving a Sears store in a mall

Sears, which filed for bankruptcy protection earlier this week, is moving to reassure consumers that it’s open for business and accepting Sears gift cards at its stores.

Still, anyone with a Sears gift card should use it soon because of the uncertainty surrounding any financial reorganization.

“Sears, Kmart, and Shop Your Way are open for business and ready to serve you,” the retailer posted online in a letter to its customers.

“We are honoring customer programs," the letter adds. "Our product warranties, protection agreements, guarantees, Shop Your Way loyalty program, and promotions continue as normal. We continue to sell and accept gift cards, and you can keep earning and using Shop Your Way points.”

The company also says the bankruptcy filing will not affect the Sears Credit Card and Sears Mastercard.

Memories of Toys 'R' Us

Still, consumers may remember what happened with another financially troubled retailer—Toys "R" Us—earlier this year. 

More On Sears

In March, the toy retailer announced it was liquidating its 735 stores after attempting to reorganize under bankruptcy protection. As part of its liquidation, Toys "R" Us gave its gift card holders just 30 days to redeem their remaining balances before the cards were rendered worthless.

Toys "R" Us customers flocked to stores and to the retailer’s website to buy its rapidly dwindling merchandise.

And though the Sears situation is, for now, different from the one for Toys "R" Us, consumers shouldn't wait to use their Sears gift cards.

No Reason to Wait

“For consumers already holding gift cards: Use them!” says Christina Tetreault, senior staff attorney at Consumers Union, the advocacy division of Consumer Reports. “It’s unclear what the future holds for Sears. But for now, the cards are accepted at Sears stores, so there is no reason to wait and plenty of reasons to use your outstanding Sears gift cards now.”

In the event a liquidation of Sears becomes necessary in the future, you don't want to be stuck with gift cards that would be difficult, if not impossible to redeem.

If Sears were to close its doors for good before you had a chance to redeem your gift card, you would be forced to file a claim with a bankruptcy court.

“The court would ultimately decide whether Sears must honor its gift cards, and if so, for how long,” says Tetreault. “It could take years for cardholders to recover funds—if they get anything at all.”

Consumers should also monitor the bankruptcy reorganization. Sears has set up a bankruptcy site here with important information and updates for consumers and investors.

Also, make sure to check your state consumer protection agency, which may have information and advice. State attorneys general sometimes intervene on gift card holders’ behalf.

Last, keep your eye on the competition. In some cases, they may offer to accept Sears cards or provide a discount for cardholders, as Brookstone did when Sharper Image filed for bankruptcy in 2008. 

Steer Clear of Gift Cards

The Toys "R" Us and Sears situations reinforce our standing advice on this subject: Stick with cash and skip the gift cards.

“We’ve always advised giving cash over gift cards, and there’s no reason now would be any different,” Tetreault says. “Cash is rarely forgotten about in the back of a drawer, and it’s accepted just about everywhere.”

Another reason to avoid gift cards altogether is that some merchants won’t replace them if they’re lost or stolen, or they’ll replace the cards only if you register them. And in most states, gift cards can expire after five years.

You should avoid all gift cards, not just ones issued by retailers, Tetreault says. Bank-issued gift cards—those carrying a major credit card company logo, such as American Express, Mastercard, or Visa—come with a major drawback. Although they can be used at any merchant that accepts that brand of card, they typically have fees when you purchase them. And after the first year, they may have additional charges for the cardholder, including monthly service and dormancy fees.