As I explained in my last post, My Latest Get Rich Slow Scheme: Gift Card Arbitrage, I recently started buying and selling gift cards to make a little money and generate credit card miles and points. One of the places I buy gift cards is eBay and by using eBay gift cards to buy retail (non-eBay) gift cards, I am able to extend my profit by a couple extra percent. Yesterday, all of my eBay gift cards stopped working and a call to eBay’s customer service was no help in explaining why. I investigated further and am going to explain why my gift cards stopped working all of the sudden, why I use so many eBay gift cards in the first place, and what my plans are moving forward.
Why Did All My eBay Gift Cards Stop Working?
I found a profitable gift card on eBay yesterday, but when I input my eBay gift card number to check out, it only sort of worked. eBay recognized that there was still value left on the card and properly zeroed out the total cost, BUT PayPal showed an error message of “This coupon or code ([####]-x) is invalid. You’re not able to use it with this payment.” (I hid the first 4 of my gift card number, but otherwise left the message untouched). I thought maybe I had used a gift card that was empty, so I tried a different one but got the same message. I then called eBay’s gift card number to verify the balance on the card and was informed that I had more than enough to cover the purchase I was trying to make.
My first thought was that eBay may have stopped allowing the use of eBay gift cards on items in their “Gift Cards” category. The thought has crossed my mind before, but since eBay is just the facilitator for the sales and not the one selling the gift cards, I don’t see how that could in any way help their bottom line. A person like myself spending $100 on video games or $100 on gift cards, both sold by a third party, doesn’t make any difference to eBay, they make their cut regardless. I then decided to call eBay customer service and find out why I was unable to use my gift card. They attempted to checkout in the same way I did and input my gift card number, but couldn’t see anything wrong on their side. As PayPal is a treated as separate business from eBay and there were no problems on eBay’s side, they transferred me over to PayPal to investigate. In retrospect, I probably should have called PayPal directly because the error message was appearing in their portion of the checkout page.
After explaining my problem to PayPal and being on hold for around 10 minutes, my customer service rep finally came back on the line. He stated that I had reached the maximum for eBay gift card usage on my account and would be unable to use any more eBay gift cards at this time. This came as a shock because up until this point I was unaware there even was a limit. After prodding further, he explained that eBay gift card usage on a PayPal account is limited to $5,000 worth on a 180-day rolling period. As I had met that number in just over 2 months, it looks like I’ll be waiting a short while before I can start using eBay gift cards again.
I did a little research afterwards and did find related information in their gift card terms and conditions that I don’t think I’ve read through before (or at least didn’t worry about a $5,000 limit at the time). The terms actually say “…verified PayPal accounts are limited to $5000 in purchases of Gift Cards in any 180-day period” (emphasis mine), but it appears that actually means $5000 in usage of gift cards, not just purchases of gift cards. Unfortunately, I recently bought several eBay gift cards, so I guess I’ll just have to sit on them until my account is able to use them again. At least my biggest fears of eBay changing item restrictions or my account being restricted for some reason weren’t the cause of the problem.
[UPDATE: How to Check Your ebay Gift Card Usage]
Why Use So Many eBay Gift Cards?
What I’ve learned about buying and selling gift cards in the past few months is that every percent counts. A 2% difference in the buy price or sell price will make a big impact in how profitable a gift card flip is, especially at the small profit margin I operate at. One way to boost that profit is by using eBay gift cards to effectively decrease the price that I am buying cards for. If I can get the eBay gift cards at a discount that exceeds the discount I would get by directly paying with a credit card, it makes sense to buy and pay with eBay gift cards. For example, I purchased a couple eBay gift cards from a grocery store last quarter when the Chase Freedom had 5% back at grocery stores. By using those eBay gift cards instead of a standard 2% back credit card when checking out, I effectively reduce the price of my purchase by 3%. That 3% makes a big difference to my bottom line.
Luckily, this will only slow down my business for now and definitely won’t stop it. While I am losing those extra few percent, there are still profitable cards out there to find and purchase. Plus, in a few short months I’ll be able to start using eBay gift cards again, but now I will be much smarter about it. When I didn’t know there was a limit on using them, I was fine adding even a single percent at times by going through eBay gift cards. Now that I know otherwise, I will limit obtaining eBay gift cards to when I can get 3% or more benefit from them. One example is buying them from GiftCardMall and/or PayPal Digital Gifts who seem to have semi-frequent 5% discounts on eBay gift cards (although they usually limit the number you can buy to one or two).
I recently learned that individuals are allowed to have 2 PayPal accounts if one is a business account, so opening another one to double my gift card limit every 180 days is probably in my near future. An alternative is opening a PayPal account in my fiance’s name, which I’ve considered before as a way to help meet minimum spends on her credit cards more easily, but that gets complicated fairly quickly if I ever need to contact customer service. For now I’m not planning on going this route, but maybe at some point in the future I’ll “hire” her into the business as a “gift card purchaser” if she signs off on the idea.
Finally, I’m just excited that the business is doing well so far and I’ve actually been able to turn a small profit while I ramp up volume and figure out the best way to run it. I plan to file paperwork for a single-member LLC soon and make the business a little more official. With a little luck, I’ll even be able to get a business credit card or two and significantly increase the number of cards I’m eligible to sign up for. This eBay gift card limit has been a small road bump, but for every obstacle that sets me back a couple percent, I seem to find new opportunity that opens more doors. I’ll be sure to keep you updated and only time will tell on what this turns into.