EVERYTHING YOU EVER WANTED TO KNOW ABOUT GIFT CARDS (BUT WERE AFRAID TO ASK): As everybody knows, gift cards have become very popular in recent years, so much so that there’s a mini-industry in place to handle the gift card abundance. It’s ridiculous that we can write almost one thousand words about gift card management as it relates to personal finance, but such is the world we live in. Odds are you have one or more of the things stashed around your house. Practitioners of personal finance ought to ask themselves: what can I do with the gift cards I already have, and is there any way for me to use them for my own financial benefit?
The answer to the second question is an emphatic YES… but we’ll get to that in a moment. For those gift cards you already have, there are several sites that let you sell gift cards you don’t want. Selling prices are often in the range of .60-80 cents on the dollar, so you take a hit, but if it’s a gift card you weren’t going to use, or if you were going to be induced to spend more money by your use of the gift card, then it’s a good choice. (Incidentally, if you don’t want to sell but don’t want to forget about the cards either, you can enter them on AwardWallet, a site which you should already be using anyway to track your various loyalty program balances.)
Which site should you sell to? If you’re looking to get the best price, Gift Card Granny compares what the various sites are offering for a given retailer’s gift card. Be warned that given the amount of fraud they have to deal with, gift card resellers can sometimes be a little tough to deal with, though. I can’t recommend any particular sites, but Frequent Miler and his readers made some recommendations, so take a look if you’re curious.
There’s another option for California residents: California law requires retailers to cash out gift cards with balances less than $10. If you have a balance greater than $10 that you’d like cashed out, see if you can split your gift card into multiple small-balance cards.
Yet another option is to use gift cards to buy other gift cards. A lot of stores don’t allow this, but some do–Sears in particular is known for this. A lot of places won’t let you do this, but it never hurts to ask.
And now the important question: how can you use gift cards for your own financial benefit? One obvious way is that if you know you have a big purchase coming up at a major retailer, you can also buy discounted gift cards to ease the sting. Buying gift cards over the internet is a transaction with high fraud potential, but you’re protected both by the credit card used to purchase and by the websites themselves. If you still don’t want to mess with gift cards on the interwebs, another option is to use, for example, a card which earns 5% supermarkets (or gas stations, or office supply stores, or whatever category you have available to you) to purchase gift cards there that you’re going to use elsewhere.
If you were particularly evil, you could exploit the California law for your own benefit by purchasing gift cards with rewards credit cards, then cashing them out. The problem with this is that it would be time-consuming and the returns would be low. If you tried to scale up the volume, stores might suspect you of criminal activity and refuse to cash you out.
And finally, there’s gift card arbitrage: buying low and selling high. The recent Staples gift card promotion is an example of this. It’s also been possible in the past to use various combinations of store discounts and credit card rewards to buy decent volumes of gift cards at a pretty good discount, then sell them to one of the online gift card resellers for a profit. Sometimes the buy-one-gift-card-with-another trick can be used for this purpose. These opportunities tend to be rare and unpublicized, so keep your eyes open–you won’t see anything unless you’re looking for it.
And since you read this thing all the way to the end, here is a real live actual gift card arbitrage opportunity I just noticed today. It’s somewhat laborious, so probably not worth your time, and if it were worth enough people’s time, the market would get flooded and prices would fall. Anyway: Maximizing Money pointed out that thanks to Coinstar you can exchange $40 worth of coins for $50 worth of gift cards from Dell, Old Navy or iTunes. In other words, you’re paying 80% of face value. If we look on Gift Card Granny, we see that Dell gift cards are selling as high as 84% as of this writing. So if you’re willing to feed $800 worth of coins into a machine, and prices don’t fall, you could possibly make yourself $40. Rinse and repeat. Worth it? Not for me, probably not for you, but maybe for somebody… Especially if you could figure out how to reduce the cost of $40 of coins. Happy carding!