Every so often, large businesses declare bankruptcy and any gift cards issued by that store will probably stop working soon after.  As soon as a store officially declares bankruptcy, most gift card exchanges will drop the price a ton to try emptying their inventory as fast as possible.  Other exchanges might not be as fast in updating their system and may continue to buy them for a period of time, but you’re taking a lot of risk if you try to take advantage of the arbitrage opportunity.  I’ll go over a recent example of this as a warning and provide some tools to double check a deal isn’t too good to be true before scooping up a lot of cards to resell.

The Latest Bankrupt Brand – Anna’s Linens

Anna’s Linens declared bankruptcy on June 14th earlier this month, but it took a while for the gift card exchanges to notice.  A couple of exchanges stopped buying them around June 18th, but I didn’t see any reduced prices until a few days ago on June 22nd.  They plan to close all the stores completely within 90 days, but may sell out even before that.  That’s means Anna’s Linens gift cards will lose ALL of their value in the next couple of months!  Don’t be the person who gets stuck with some in the meantime.  This chart from Gift Card Wiki tells most of the story:

(I haven’t mentioned them up to this point, but I really need to do a full post on Gift Card Wiki.  It’s a fantastic new website that aggregates gift card buy AND sell prices while providing a lot of useful data on both ends.  I highly recommend them, plus a little competition between them and Gift Card Granny should only be beneficial to everyone in the gift card game!)

Is There Opportunity Here?

The most obvious opportunity might be to buy the discount cards from the quick-to-act exchanges and sell them to the ones that haven’t stopped buying yet, but I don’t recommend it.  ABCGiftCards/CardCash (same company, two websites, kind of odd) dropped the price of Anna’s Linens gift cards to 50% off, but they are physical cards that will be mailed to your house.  That’s WAY too much risk for my liking because by the time they make it to my house, there’s a pretty good chance no one will be buying them any more.  Even though a couple exchanges currently appear to be buying them at above 50%, actually trying to take advantage carries a lot of potential problems.  If I could buy and sell the cards digitally, I might give it a shot, but there’s still the chance the deny the sale and I’ll be stuck with worthless cards.  You’d have to dig into the legal jargon of each exchange to see how much power they have to reject cards, even days later.

There is a potential reselling opportunity if the store in question has items worth reselling and are liquidating their inventory.  Be sure to double check that gift cards will still be accepted (the courts typically require the store to accept them for some period of time), but you could get the gift cards at a heavy discount and then liquidate them into merchandise to resell.  I don’t imagine there is a lot of opportunity with Anna’s Linens, but something like Circuit City or the more recent RadioShack probably yielded reselling opportunities for someone with knowledge of the domain.  I haven’t dabbled in reselling products yet, but it’s something I’ll probably try out soon.

Protect Yourself

Buying gift cards to resell definitely yields a lot of opportunity to earn miles/points and maybe a little profit, but there are certainly risks.  Buying big brand name gift cards like Walmart is almost always a safe bet, but be sure to double-check everything it’s a brand you’ve never heard of.  I’d never actually heard of Anna’s Linens until I stumbled across their cards for 50% off and I almost jumped on the opportunity after checking that SaveYa was buying for 59%.  Luckily, I learned from my mistake of almost getting burned on Cache gift cards back in February and decided to Google the brand name first.  A quick search of “Anna’s Linens” in the News part of Google revealed numerous articles about their recent bankruptcy.  This quick check via an easy Google search saved me possible hundreds of dollars.  Always double check the details if a deal seems too good to be true!

A great resource to bookmark is Raise’s Do Not Buy List.  While it might not get updated the same day the bankruptcy is announced, they do update it frequently with the latest risky cards.  Aside from brands in bankruptcy, they also list a bunch of cards that you should avoid such as Big 5 Sporting Goods that have very strict non-transfer rules with their gift cards.  I’m not sure on the legality of these rules, but have fun taking them to small claims court when they zero out the balance on your recently purchased second-hand gift card.

If you decide to venture beyond the standard ebay, Safeway, and Amex Offer oppotunities, be sure to do your homework on the brands you’re buying to resell.  A quick glance at Raise’s list or even a quick Google search could end up saving you a ton of money.