Gift cards have risen in popularity over the years and are a go to gift for many people.  Giving gift cards is a little more personal than giving cash, but still allows the recipient to pick out what they want themselves.  Especially useful when you want to give clothes but have no idea what size to buy.  Stores and restaurants love it when you buy gift cards as well.  Not only do they get the money up front, but millions of dollars in gift cards each year go unused for various reasons and essentially turn into pure profit for the retailer.  This is why stores are so eager to offer you their gift cards and even give other stores a cut to sell gift cards for them.  Have you looked at your local grocery store’s gift card rack recently?  There’s a ton of different ones to choose from, making last minute gifting even easier.  I don’t have any problem with giving or requesting gift cards for gift giving events, but I would argue you’re missing out on some opportunities if that’s all you use them for.  Below, I cover a few different ways to incorporate gift cards as a part of your finances to save money and even dive into a crazy example of how you can really stretch their potential in certain situations.

 

Buy Gift Cards At A Discount

More likely than not, you probably end up spending money at a lot of the same places over and over again.  Grocery stores and gas stations are an easy example, but that fast food place you eat at once a week and the place you buy clothes are also opportunities to save some money with gift cards.  One of the simplest ways to save money is to simply plan ahead and buy gift cards at a discount to use in the store or online.  I like to use Gift Card Granny to compare prices across several different gift card resellers at once.  Just search for the store/restaurant/brand you might want to buy a gift card for and see all the different prices you can buy them for.

Caution!  Every reseller had different warranties and guarantees that you should pay attention to before loading up on a lot of gift cards.  Typically they only guarantee the value on the cards for 45-100 days, so it is in your best interest to use the full value of the card before that date.  Ebay is a great place to find deals on gift cards, but their standard Money Back Guarantee only extends for 30 days, so be cautious when buying.

Extend Category Bonuses

Even if  you are paying full price for the gift card, it still may be advantageous depending on where you are buying the gift card.  Several credit cards offer bonus points/miles/cashback for shopping at certain locations such as grocery stores or gas stations.  By buying gift cards at these locations, you can take advantage of that bonus at more locations.  For example, the Chase Freedom is currently offering 5% back on all purchases at grocery stores which includes the purchase of gift cards.  If I buy a Home Depot gift card at the grocery store using my Chase Freedom and then use that gift card at Home Depot for my next purchase, it’s like getting 5% back at Home Depot!  That’s a significant improvement from the standard 1-2% possible at Home Depot most of the year, and this is possible at any location that has gift cards sold in grocery stores.  Gas stations and office supply stores are also good places to buy gift cards in order to extend category bonuses to other locations.

Extend Deal Expiration Dates

The main inspiration for this section is Amex Offers, but I would bet this could apply to other deals that are similar in nature.  Amex frequently offers statement credit rebates for spending a certain amount at a specific store.  For example, a current deal offers a $20 rebate after spending $100 at Adidas (in-store or online) that expires March 14th.  If you didn’t need a new pair of shoes now, but do anticipate buying some in April, normally you wouldn’t be able to take advantage of the effective 20% off that this deal offers.  But, if you use the Amex Offer to buy $100 in gift cards instead, you can get the $20 back now and still be able to use the $100 towards a future purchase.  No more expiration date!  And if you decide that you probably won’t ever spend money at Adidas again (worst case scenario), it’s possible to resell the gift card to get most of your money back.

Sell Your Unused Gift Cards

Whether you got a gift card as a gift that you never intend to use, or bought some in anticipation of a purchase that never came to be, there are several websites that will buy your gift cards from you at a % of their value.  Gift Card Granny also lists the public rates that various websites are currently buying gift cards at on their sell page.  All the gift card buying websites are different in what rates they offer, what kinds of gift cards they take, how you send in the gift cards, and how they pay you.  I won’t go into the details here, but Doctor of Credit did a great article on the ins and outs of the various places to sell gift cards which can be found at The Complete Guide to Selling your Unwanted Gift Cards for Cash.

An Extra Benefit For Certain Gas Stations

I’ve stumbled across a couple unique ways to use gift cards that you might not expect.  For example, some of the gas stations that offer a discount for paying with cash or debit also extend this discount to their gift cards (not all gas stations do though, so check first).  It those cases, it is possible to buy the gift cards with a credit card at the location itself or ahead of time at a grocery store or other place that sells gift cards in order to get credit card points/miles/benefits AND the discount per gallon.  If you can find the station’s gift cards at a discount, it makes it all that much better.

There’s Always A Catch

Aside from the risks mentioned above that come with buying discounted gift cards, there’s a few other downsides to dealing with gift cards for your spending.

• You might lose the gift card
  • Most retailers will issue you a new gift card if you have the original purchase receipt, but if you lose the receipt or buy through a reseller, you might be out of luck.
• No credit card benefits for the purchase
  • Many credit cards come with some set of extended warranties, price guarantees, and purchase protections that apply to anything bought on the card.  Because the gift card adds an additional layer in-between the credit card and the item you want, most of these benefits no longer apply.  This doesn’t really matter for things like gas, groceries, or restaurants, but you’ll definitely want to take this into account before funding your multi-thousand dollar tv purchase with gift cards.
• Hard to liquidate in a money emergency
  • Tying up your money in gift cards can save you money over time, but if an emergency comes up, $500 for Bed Bath & Beyond won’t help cover your rent.  I highly recommend having a sufficient emergency fund before investing too heavily in gift cards for future purchases.

That Crazy Example I Promised

I haven’t actually done this (yet!), but I was playing around with the possible savings on a potential big purchase by using a couple layers of gift cards and several other money metagame strategies to reduce the price.  I’ll pick a nice even number to do the calculations with, but this can be expanded to almost any price.

To start, we need an item that we want to buy.  For this example, I am going to look into buying an appliance at Sears.com.  The appliance itself isn’t important, but let’s say after applying a series a coupons, Shop Your Way (Sears’ loyalty program) points, and calculating the tax, the total comes to an even $500.  The average consumer would pay the $500 with their favorite credit card and probably earn 1-2% back, so let’s say their final out of pocket cost is $490 ($500 – 2% cash back).  How much better can we do than the average consumer?

Let’s work backwards, why didn’t they use a shopping portal?!?  A quick glance at CashBackMonitor shows that Sears currently has several lucrative options.  Depending on how you value Southwest points or Chase Ultimate Reward points (currently offering 4 and 3 points per dollar respectively), these might be better choices, but we’ll keep it simple and choose one of the many 5% cash back options.  That’s an additional $25 saved already!

What about the payment method choice?  A 2% earning card is nice, but we can do better with gift cards.  A quick glance at Gift Card Granny shows we can save 8-9% by buying them from CardPool, so that’s one option, but there’s no reason we can’t make this more complex to save a little extra.  I know my local grocery store (Fred Meyer is my store of choice, but several others offer similar rewards programs) has a generous rewards program that gives a quarterly rebate coupon of 1% back on most purchases (gift cards included) AND double fuel points on gift card purchases.  One of their gift card offerings is Sears, but another choice is eBay where PayPal Digital Gifts sells Sears gift cards in any quantity at face value.  Face value may seem like a wash, BUT we can also use a shopping portal and earn eBay Bucks when using an eBay gift card, plus you don’t have to worry about the gift cards not working since they are activated and sold directly by PayPal Digital Gifts.  On top of that, my Chase Freedom card currently offers 5% back on all grocery purchases!

Are you still with me?  To summarize, we are going to buy eBay gift cards at a grocery store, use them to buy Sears gift cards on eBay, then use those Sears gift cards to pay for our $500 purchase at Sears.com.  Let’s look at the details of each step:

1. Purchase $500 in eBay gift cards at Fred Meyer with a Chase Freedom card
   • Out of pocket cost is $500
   • Fred Meyer Rebate Rewards of 1% give us back $5 at the end of the quarter
   • Double Fuel Points on gift cards gives us 1000 points worth $1 off per gallon up to 35 gallons
     • I’ll conservatively say we use that towards a purchase of 15 gallons for a savings of $15 (3% back)
   • 5% Cash Back from the Chase Freedom returns us another $25
2. Use the $500 in eBay gift cards to buy $500 in Sears gift cards
   • A shopping portal can be used for this purchase
     • At the time of writing, the best rate is 1.5% back which returns us $7.50 in cash
   • eBay Bucks are also earned on non-“ebay gift card” purchases, so at 2% we get another $10 back to use on a future eBay purchase
3. Use the $500 in Sears gift cards to buy our new appliance at Sears.com
   • Shopping Portal at 5% as mentioned before ($25)
     • Not all stores pay out shopping portals if a gift card is used, but Sears is one of the ones that does
   • Sears Shop Your Way points earned at 1% give us an additional $5 back to use at a later date

Final Calculation:

Fred Meyer purchase of $500 in eBay gift cards	$    (500.00)
Chase Freedom 5% cash back	$        25.00
Fred Meyer Rewards Rebate	$           5.00
Fred Meyer Fuel Points Value	$        15.00
Sears Gift Card Purchase of $500 with $500 in eBay gift cards	$               –
eBay Shopping Portal at 1.5%	$           7.50
ebay Bucks at 2%	$        10.00
Sears.com Purchase of $500 with $500 in Sears Gift Cards	$               –
Sears Shopping Portal at 5%	$        25.00
Sears Shop Your Way Points at 1%	$           5.00
Final Cost	$    (407.50)

After all of that we saved $82.50 (16.5%!) MORE than the average consumer!

Worth It?

Some crazy situations I’ve come up with in the past have yielded pretty marginal savings given the effort involved, but this (or something very similar) is one I would probably actually take advantage of the next time I need to buy something at Sears.  Assuming I’m making a trip to the grocery store anyway, there’s minimal additional time investment to add the gift cards to my cart.  The rest can be done online and would probably only add 10-20 minutes to the time needed to make the purchase.  Saving $80 for 15 minutes of my time is something I would do all day if I could.

Despite this example being a little complicated, hopefully you now understand how planning out your purchases ahead of time and maximizing the different options available to you (including gift cards!) can save you a lot of money, especially for larger purchases.

What if the stars aligned?

With a good amount of patience or a miraculous alignment of all the best deals involved in this offer, the savings can get extra crazy.  Let’s cover the best cash back opportunities from my recent memory for each part:

• Credit Card Used
  • The Amex Blue Cash Preferred offers 6% back on all grocery purchases up to $6,000 per year, but also comes with an annual fee of $75.  The signup bonus is currently $150 back after $1,000 in spending, so if I got the card for the bonus and didn’t plan on using all $6,000 of the maximum grocery benefit then we could bump up the credit card cash back from 5% to 6%
• Fred Meyer Rebates Reward
  • I recently got a coupon to earn 3x Rewards points on all purchases as part of their 10th anniversary of the rewards program, so that bumps the 1% rebate to 3%
• Fred Meyer Fuel Rewards
  • If you drive a larger vehicle and can take advantage up to the $1 off each of maximum 35 gallons, we can bump the 3% fuel rebate up to 7%
• Shopping Portal for eBay
  • Just last week at the time of writing, Ebates offered 5% back on gift card purchases at eBay.  I’m not sure if it’s been higher in the past, but that bumps the 1.5% up to 5%
• eBay Bucks
  • I occasionally get emails from eBay offering 4x eBay Bucks on most purchases (non-ebay gift cards included), so that bumps the 2% up to 8%
• Shopping Portal for Sears
  • This past holiday season, several shopping portals offered 10% back on Sears purchases, so that bumps the 5% to 10%
• Shop Your Way Points
  • If you are a part of Sears’ Shop Your Way Max program, you get double the base earning of points so the 1% is bumped up to 2%

Taking all of these bonuses into account, we can now purchase our appliance for a final cost of $290 (42% off!!!).  And don’t forget, this is 42% additional savings on top of whatever coupon codes used and deals Sears has going on.

Did I miss any opportunities to save even more money?