Ever since I started paying close attention to my finances, looking for ways to further optimize them is usually near the front of my mind. As I mentioned my previous post, Financial Independence: An Introduction, the primary ways to do this are to cut out wasteful expenses, reduce the costs of the ones left, and look into generating more income. My latest adventure involves the last one, generating more income, and is tied directly to several of the other strategies I’ve discussed in the past including churning, shopping portals, and gift cards. I’ll walk you through how I got the idea in the first place, how the operation works at a high level, some of the numbers behind it, and my latest adventure to get more gift cards to sell.
How I Stumbled On The Idea
I’m certainly not the first person to try to make money buying and selling gift cards. In fact, the only reason I’m able to make it work myself is because several other businesses exist solely in the market to buy and sell gift cards. But before I get into that, let’s talk about how I found the idea in the first place.
Once I started churning credit cards in order to reduce my expenses and maximize the money I was getting back from my everyday purchases, I started following a lot of blogs and forums related to the subject. A topic that comes up fairly often is manufacturing spend, or charging items to credit cards in which you can recover most or all of the cost of back into your bank account. The primary benefit being that you can generate miles/points/cashback on the credit card with little to no out of pocket cost. It also enables you to hit more minimum spends required for the signup bonuses, allowing you to sign up for more cards and get more bonuses without being limited by your normal everyday expenses.
Anyway, reading about manufacturing spend led me a blog that is primary dedicated to “gift card churning”, or buying and selling gift cards for a marginal cash loss/gain with the intention of generating credit card spend. Unlike many spend manufacturing techniques that take advantage of loopholes and/or use products/services in ways they weren’t intended for, the buying and selling of gift cards is more about finding arbitrage opportunities in the marketplace. Is either one ethically or morally above or below the other? You can decide that for yourself, but buying and selling seems to be the cornerstone of most businesses in the world, so I haven’t lost any sleep over it. Anyway, the blog is Chasing the Points and the person who runs the website has been a great resource to me through his various posts on the subject and has even been kind enough to answer some questions I sent him through email.
Once the idea that it was possible to buy and sell gift cards for profit was in my head, I started to do a little research to see if I could find some of these opportunities myself. I’ll explain in more detail below, but since I know the price I can sell them for, the actual work is finding opportunities to buy cards for that price or lower. To my surprise, I was able to find a few of these opportunities pretty quickly and after double checking my math, I made the purchases. I started small to test the waters and verified I would actually get paid in order to make sure I wasn’t missing anything. Fortunately, the first sale went smoothly and when the first check arrived, I immediately started coming up with ideas to potentially turn this into a small side-business by scaling it out and making the whole process more efficient.
How The Operation Actually Works
I’ve always had a knack for math and I rather enjoy working with numbers, especially if those numbers translate to making money. Someone without those two characteristics probably wouldn’t be a good fit for this particular business because it all comes down to a bunch of percentages that add and subtract to determine whether or not it makes sense to buy a gift card. The basic principle in the business of buying and selling is to buy for $X and sell for more than $X, and gift cards being the item you buy and sell doesn’t add too much complexity to that, but here are the basics:
- Find and buy gift cards that are discounted more than the rate you can sell them at. Finding the rate you can sell them at can be as simple as checking Gift Card Granny’s sell page for the current rates that various gift card resellers are buying different cards at. The tough part is finding cards that you can buy below that rate, but credit card deals, gift card marketplaces, and limited time offers are a few examples of where they might come from. Factoring in shopping portals, credit card points, and other means of revenue is very important to see what the “real” cost of each card it.
- Sell the cards to a gift card reseller such as SaveYa or Cardpool. Sometimes you can sell just the gift card code online and other times you have to mail them in, but overall it’s a fairly painless process.
- Cash the check and count your earnings. A large number of the cards I buy and sell may look like losses at first (for example, I recently bought a Best Buy gift card for $185 and sold it for $177), but if you factor in the rebates I got for that purchase such as $18.50 in eBay Bucks, $2.78 from a shopping portal, and 185 credit card points, that $8 loss suddenly turns into a $15+ profit!
Since the sell prices are known going in and change rather infrequently, the risk I am taking on is relatively low. At the same time the profit margins are nothing to get too excited about and I certainly wouldn’t be able to replace my full time job with this anytime soon, so the open question is: Is is all worth it?
Examining The Actual Benefits
For the time being, deciding whether or not this business is worth pursuing long-term is still an open question. I started around 2 months ago and am still finding new opportunities and ways to make the business run more efficiently, so it’s too early to say. Fortunately, the start-up cost of this business is next to nothing and I could stop buying tomorrow, sell the rest of my inventory over the next couple of weeks, and walk away completely still having made a little money in the process. Will I still be doing this 6 months or a year from now? Maybe, but it could be at a much smaller or even a much larger scale than it is now, it’s just too early to say what this may or may not turn into. Making the operation more efficient is my main goal at this point, but at some point in the future I will take a close look at the time and effort required vs. the benefits gained and decide what pace I want to settle at. Regardless of that eventual decision, let’s look at some of the benefits themselves.
- Cash Money – Always an important consideration to any business and this one is no exception. I’m currently averaging a couple percent profit on each card sold if you count eBay Bucks as cash, so the actual cash profit is slightly lower.
- Other “Profit” – The number above does NOT count any of the credit card points/miles that are earned when buying the cards OR the additional benefits such as fuel points that are earned. Taking those into account, the actual profit per card is several percentage points higher.
- Buying Gift Cards to Actually Use – While the business buys gift cards to turn around and immediately resell them, myself as an individual can buy them to actually use. Since I am the business, the distinction isn’t too important, but whenever I buy cards to resell for stores I actually shop at, I also have the option to simply use them and get more benefit than simply selling. For example, I’ve bought a few Target gift cards for about 85% of their value and while I could turn around and sell them for about 90% of their value, it would actually make more sense to just use them and get closer to 100% of their value back (assuming I was going to buy things at Target anyway). I don’t count the cards I use personally towards my business numbers, but the benefit can’t be ignored because it saves me a decent amount of money on my regular spending.
- Ability to Churn More Credit Cards – For me, the limiting factor in signing up for new credit cards was primarily the amount of money I spend on a regular basis. It obviously doesn’t make sense to buy things simply to get the bonus, so I was limited by my regular spending habits as to how many cards I could sign up at a time and still meet the spending requirements. While the normal profit margins and opportunities may be minimal, the additional rebate that comes from credit card signup bonuses makes the total profit go up drastically.
While the benefits seem great, they come at the cost of time and effort. I am working to reduce the time and effort required when buying and selling, but it will always be a factor. Luckily, 95% of the business can be run from my home in my spare time and doesn’t require me to be available at any particular times, so the impact on my life is only as much as I want to be. As I increase my efficiency finding and buying cards, the benefits can be maintained or even go up while the time required gets smaller. Once again, we’ll have to wait and see where it ends up.
My Latest Gift Card Sourcing Run
While I purchase a good number of the gift cards online, sometimes deals in person are too good to pass up. I spent some time recently driving around to a few different stores to take advantage of the deals they were offering on gift cards to acquire the stockpile below:
Stops #1, #3, and #5 – Safeway with a Coupon Loaded on My Loyalty Card
Safeway had a “just for U” offer on Gap branded gift cards that could be added to a Safeway card via their website or mobile app. This post by Doctor of Credit was the first place I saw the deal: Gift Card Arbitrage at Safeway, 20% Off Gap Gift Cards. The deal reads “Gap Brand Gift Cards: For every $25 in Gap Inc. gift cards purchased, save $5 instantly.” which equates to a 20% discount on Gap brands including Old Navy and Banana Republic. A glance at the public sell rates showed most Gap brands can be sold for ~80.5%, but Old Navy can be sold for 81.5%. Side note: I’m not sure why the gift card exchanges buy these at different rates, because to my knowledge they can all be used interchangeably at any brand owned by Gap. Nevertheless, the cards could be flipped for a profit (a small 1.5% one), before even taking into account additional rebates. One of those additional rebates is fuel rewards which are doubled on gift card purchases at Safeway. And to my surprise, the fuel points received were based on the value of the cards, not what I actually paid, so they were even more beneficial than normal.
My main goal when taking advantage of deals is to not inconvenience anyone else in my pursuit of saving/making money, and that includes holding up people at the Safeway checkout. For that reason, I only opted to buy a few hundred dollars worth at each Safeway instead of attempting to buy them all. Because I was making stops at two other stores anyway and Safeways seem to be located everywhere, it wasn’t difficult for me to hit multiple stores.
Since the gift cards allow you to put anywhere from $25-$500 on them when purchasing, my initial plan was to just load $300 on a card or two and get the 20% off that way, but it turns out the coupon is coded to only take off $5 per gift card rather than $5 off for each $25 loaded. After discovering that, I decided to buy $300 worth at the first location, $400 at the second, and $500 at the third based on how many were available on the gift card rack and how busy the store was at the time. Since the loaded coupon can be used an “Unlimited” number of times and doesn’t expire for another week, there’s a very good chance I’ll be back to buy more in the coming days.
After selling the $1200 worth of Old Navy gift cards I purchased at 20% off, I will profit $18 cash plus 960 American Airlines miles (worth ~$15 towards flights) plus $1 off per gallon at my next two fill-ups at a Safeway or Chevron gas station (probably ~$25 worth).
Stop #2 – Sears with a BankAmeriDeal
Bank of America offers BankAmeriDeals on many of their credit cards and my Alaska Airlines card is no exception. Chasing the Points posted about a new Sears deal here (Check Your Bank Of America Card For An BankAmeriDeal) and I decided to check my own account to see if I got the same one. While his deal was for 10% off, mine was for 15% off, but both had a maximum refund of $20. That means I could spend up to $133.33 at Sears and receive 15% back and because I started paying attention to the gift cards racks at all the stores I visit, I know my local Sears sells Shell gift cards. In general, grocery store and gas station gift cards sell for the most money because everyone has a use for them. Since gift cards are sold in $25 increments most of the time, I decided to purchase $125 worth of Shell gift cards at 15% off and I can resell them for 91.5%. That’s a 6.5% profit ($8.13) and 125 Alaska Airline miles which can be worth ~2 cents each ($2.50). While I can resell these, I’ll probably end up just using them because I have a lot of Fred Meyer fuel rewards to use in April and they work at Shell stations.
Stop #4 – Lowe’s with an Amex Offer (or two)
Amex Offers are similar to BankAmeriDeals in that you load them to your credit card ahead of time and they will automatically add in the savings on your next statement. Amex currently has a deal where you get $10 off a purchase of $50 or more at Lowe’s. While I only have 1 Bank of America card right now, my fiance and I have 4 Amex cards between us. Due to the nature of Amex Offers, you can also load the deal to an Authorized User’s card and get the deal twice per credit line. Because I knew about this a while ago, I made sure we both had each other as authorized users on all of out Amex cards, which means we can use this deal 8 times! We had already used 6 of the cards previously to this trip, so I only had two left to use up. I’m glad we did use them up already, because we certainly weren’t the only people taking advantage of the deal by buying gift cards. The first time we went, we bought the last few eBay gift cards because those are almost as good as cash to me. The next time, we bought Shell gift cards because those can be resold (or used) for a nice return. This time, there were no more Shell cards, no eBay cards, and the entire gift card rack looked like a tornado swept through and took half the cards with it. Fortunately, I did spot some Staples cards left over which can still be sold for a profit after the 20% discount the Amex deal offers. Next time, we should probably just use all of our Amex cards on the first trip, so lesson learned. This particular trip of buying 2 $50 Staples gift cards will yield a profit of $6.50 plus 100 MR points (worth ~$2).
The Old Navy cards I was able to immediately sell online once I got home, while the Staples cards can be sold for a higher rate if I mail them in. I typically wait until I have several cards to mail in before actually sending them to save on postage, so it will probably be a week or two before I actually sell them. At the end of the day, I calculate a cash profit of $32.63, about $19.50 worth of points/miles, and around $25 worth of gas rewards. Not too bad for about 2 hours of my time.