Gift cards are not as liquid as cash. Gift cards are good for most purchases at a particular store — or a particular set of stores — but nowhere else. This is why there’s a secondary market for unwanted gift cards:
- People sell their unwanted gift cards for a discount to face value.
- They might sell to the buyer directly on eBay. The buyer gets the card at a discount to face value.
- They might sell the card to a site like Raise.com or Cardpool.com. These sites buy cards at a (typically) steeper discount, sell them to buyers at a lesser discount, and pocket the difference.
The discount amount that the market will bear varies widely by the merchant. Overall, the less the demand for gift cards from a particular merchant, the steeper the discount. If a merchant’s cards are in high demand, they don’t go for much of a discount at all.
Why are some particular gift cards in such high demand?
The fact that some gift cards go for a razor-thin discount begs the question: Why?
It boils down to utility. There are three factors that I see as increasing the utility of a particular store:
- Price. You’ll be hard-pressed to find someone who doesn’t like to buy things for less. Stores that already sell for low prices have an advantage here. This makes gift cards for stores like Walmart, Target, Costco, and Amazon.com go for only a few percent discount. Heck, 5.5% is a huge discount for a Walmart card. A card at that discount gets snapped up in a minute!
- Variety. A store that specializes in one particular type of merchandise has less overall utility than a store that spans the gamut. This contributes to small discounts for gift cards at department stores like (again) Amazon.com and Walmart, as well as Target, Kohl’s, and Sears.
- Necessity. When you gotta, you gotta. Businesses like gas stations and grocery stores sell necessities. If you’re going to spend the money anyway, then why not spend less? Gift cards for gas stations regularly sell for only a few percent discount — if you can find them!
So, not only do these kinds of gift cards make for a good opportunity to save a few bucks, they also make pretty good … gifts! You’re pretty sure that they’ll be used, and not resold.