Discounted gift cards are a reasonably easy way to spend less at many stores. Briefly, the market for buying gift cards under face value goes like this:
- A person sells an unwanted gift card to a liquidator like Cardpool or GiftCardZen for, say, a 20% discount to face value.
- Another person buys that gift card for a lesser discount, like 10%.
- Everyone wins: The seller has cash, the buyer gets an easy discount, and the liquidator pockets the difference.
I recently bought a discounted code for Walmart.com on Cardpool to save a little bit more on our powdered milk order online. Because Walmart's prices are already low, the demand for discounted cards is high, and the percentage discount is pretty low. I got mine for a 2% discount — not huge, but better than nothing. (I also squeezed out an extra 0.4% by clicking through from Coupon Cactus.)
Great, but how can these savings be tracked in personal finance software?
If I include all of the cards and codes I bought recently, I bought about $150 worth of Walmart purchasing power for $147. However, if I categorize purchases made with the gift cards in Quicken, there's a slight mismatch when I try to account for the purchases. If I were to buy $119 worth of groceries and $31 worth of garden supplies with those cards, what about the $3 discount? I paid only $147 for those cards, not $150.
Now, I do understand $3 is a small amount of money, but scale it up, and the difference can be substantial. (Plus, we're faithfully tracking our expenses, so these amounts matter.)
There are a few ways to do it:
- Allocate the entire gift card to one category of purchase. Let's say that the cards I bought were $50 face value each, and I paid $49 apiece for them. My credit card was charged $147. I could allocate an entire card to, say, groceries, and use that card only for groceries. Then, when I buy $50 worth of groceries, I categorize $49 of that credit card charge as groceries. The disadvantage of this is that I have to remember how much the discount on the gift card was in order to allocate the correct amount.
- Use the cards for any kind of purchase, and discount the items from the receipt. This is the same idea as above, but I'd multiply all of the purchase amounts by 0.98 (a 2% discount), and record each of those categories on the credit card transaction. This is a lot of work.
- My favorite: Create a Gift Card cash account in Quicken, and credit the amount of the purchase into that account, plus an adjustment to bring the amount up to face value. So, from above, I'd see a debit of $147 on my credit card account, and a credit of $150 into my Gift Card cash account. The $150 credit would be split into $147 of Gift Card Purchase and $3 of — oh, let's say Gift Card BPP (Bonus Purchasing Power). Doing it this way accomplishes a couple of things. First, I account explicitly for how much I'm saving on purchases by buying the discounted gift cards. Secondly, I can then treat transactions from that account at face value — easy.
That's my story, and I'm sticking to it. Do you use discounted gift cards regularly?