What’s the most requested gift this holiday season? It’s not a flat-screen TV or the iPad. It’s a gift card, according to the National Retail Federation. This season alone, the NRF projects that gift-card spending will reach $27.8 billion—a substantial portion of the $100 billion in card sales anticipated for the year. The average shopper will spend $155 on these plastic presents, up $10 from last year.
But what if you receive a gift card that just doesn’t fit? What if you receive a chunk of change redeemable at Brooks Brothers when you’re more of an Ann Taylor shopper—or at Williams-Sonoma when you just don’t cook? Or what if it’s just too much? After the holidays, you may wind up with gift-card dollars left over after making your purchases. All in all, these plastic bits and pieces add up. The average American house-hold has about $300 in gift cards on hand at any time.
What’s emerged as a result is a fast-growing business in secondhand gift cards online. Sites like PlasticJungle.com, GiftCardCastle.com, and CardHub.com have sprung up to help facilitate the sale and exchange of cards. Whether you’re a buyer or a seller, there’s opportunity to cash in.
How does it work? Let’s say you have a $100 gift card that you’re not going to use. You go to a gift-card site and type in details of your card—the retailer, the card number, its value. The site will come back with an offer of how much it’s willing to pay. The more popular the merchant (and the rarer the card) the more you’re likely to get for it. Right now, a $100 Best Buy card will fetch $86 on one site. A $100 card from Urban Outfitters brings in $78. If you find the site’s offer acceptable, you can either sell electronically (in certain cases, the card number and PIN are all you’ll need) or you can send your card through the mail and receive a cashier’s check, Amazon.com gift card, or Paypal deposit in return.
These sites then turn around and resell that gift card for slightly more than you unloaded it. That’s how they make their money. Someone may end up spending $95 on that same Best Buy card you sold for $86, for instance. That’s a reflection of the fact that there are more buyers than sellers, says Bruce Bower, CEO of Plastic Jungle. “We have some people who transact a lot,” he says. “They tend to soak up a little more volume.” Still, for a shopper looking to load up on gifts for friends at a particular store over the holidays, doing that shopping with a discounted gift card makes sense. You still get to take advantage of all the promotions and sales. You can come out with a gift receipt for your purchases. And the recipient will be none the wiser.
There are a few things you should know before playing in this sandbox. Sellers may be tempted to eliminate the middleman’s take and peddle their cards on Craigslist or eBay. That’s a good idea, says Odysseas Papadimitriou, CEO of CardHub, whose site functions as a gift-card aggregator and allows consumers to list their own cards via their Facebook accounts. (Go this route and you have to finish the transaction yourself, too. CardHub doesn’t do that for you.) “If you’re not in a hurry, list it yourself first,” he suggests. “If it doesn’t sell, one of the other websites will buy it.” Selling it yourself is also the way to go if you have a gift card from a local rather than national retailer.
Buyers, on the other hand, have to be wary of these solo practitioners. The major gift-card sites—including eBay, for transactions of up to $500—will guarantee that cards you buy from them are worth what they say they are. Buy through Craigslist, however, and you don’t get those guarantees. In that case, as with other merchandise you buy this way, agree to meet in a public place to execute the transaction, check the balance on the card by phone while you’re together and, for the benefit of the seller, deal in cash. And if any part of a deal smells funny, simply walk away. Says Kathy Grannis of the National Retail Federation: “We’re certainly not ones to come out and say don’t [buy second-hand gift cards] but it’s important for consumers to consider the risk of fraud.”
With Maggie McGrath