Thursday, January 28, 2016

Deciding Whether to Use a Discounted Gift Card or Buy with a Credit Card Straight Up

I used to use a ton of discounted gift cards in my purchases and I still use plenty.  There is a different calculus I have when buying a gift card for a purchase that I will resell than for personal use.

You can see that just from Raise I've saved almost $4,000 buying gift cards and that's just one of the exchanges (and almost all from this year).  The savings really do matter.  I'm also trying to help out all your gift card sellers ;)

I know that some of you have saved a lot more than that, that's not the point.  The point is that there is tremendous savings to be had.

Just because there is a gift card does not mean I will buy it.  There have been many times where I didn't buy a gift card even though they were readily available at a discount.

Here is my thought process as I decide whether to buy a gift card.

The Amount of Savings Matters - Obviously

Depending on the brand, you might see some gift cards on Raise that are selling at close to face value and some at face value (like gas cards so that you can get the cash price).

I almost never buy gift cards that are 1% off or less with very small exceptions.  At this point, I rarely buy if it is 5% or lower.  I know, I'm a snob but you are really giving up a lot by using gift cards so I need to make sure it is worthwhile.

Credit Card Rewards Matter

Sometimes you are losing out on category bonuses by buying gift cards instead of using a credit card. For example, buying a staples gift card from Raise, you are giving up 5x Ultimate Rewards by not using your Ink card directly at Staples (assuming you don't max out your Ink in other ways).

Depending on how you value Ultimate Rewards will decide how much of a discount above 5% you need to make it worthwhile.  You still do earn your regular credit card rewards when you buy gift cards online so that is 2%+ you should be earning either way.

The opposite can be true as well.  See this DoC post for an example.

Tracking Matters - A Lot

I hate tracking gift cards.  I really hate tracking gift cards.  Such a pain but it is very necessary.  If you can't track properly, you should avoid consistently buying gift cards.

If you buy 100 $100 gift cards at 5% off you will have saved $500 on $10,000 of gift cards.  Misplace one, forget you had some balance remaining and you are in trouble.

What if you bought some fraudulent gift cards?  Exchanges will typically cover fraudulent gift cards but the protection afforded ranges from 45 days (Card Cash) to 100 days (Raise).  What if you meant to make a purchase and it took a day for the gift card to come and now the sale is over.  Now it is 46 days later and your gift cards are all DOA.  Uh oh.  Good luck with Card Cash!

eBay is the worst.  With their limits on gift card usage, you could be stuck with a gift card for a while because you didn't know how close you were to the limits.  That's a disaster waiting to happen for many.

I have to do a lot tracking already without gift cards.  Gift cards and another level of complication.  I have to make sure it's worth it.

Price Matching  Matters

Many credit card offer some great protections including price matching if the price goes down (see Citi Price Rewind for example).

Some sites (like Macy's) are very good at providing a price match if they lower their price.  That makes me more likely to buy a Macy's gift card since I know I am not losing out on Price Matching if I do.  Usually it is as simple as sending an email asking for a price match.  Also helps that I can usually buy them for 10%+ off.

Price matching has saved me well over $1,000 this year from reselling. That's a big deal.  Also make sure you sign up for Paribus (they will cover Macy's purchases).  They have really been coming through for me lately.

Return Protection Matters

Return Protection is another great credit card tool available.

Take an example: Staples will only let you return an iPad for up to 14 days.  What happens when you have a return on Amazon for an iPad?  You will be well past the return deadline once you get it back.  You can sell it as used (they still sell well as used but you will take a hit on price) or you can return it through your credit card after the deadline, often for up to 90 days.

I've had a lot of returns in December and January.  There are some items that are super easy to return.  Bought a toy at Target or Walmart, just return it for up to 90 days (need a red card for Target for 90 day returns).  Even if you don't have a receipt (you should be keeping your receipts) they will often give you store credit.  Don't do that too much as they monitor returns and can ban you for too many returns.

This means I am much more likely to buy a Target or Walmart gift card than a Staples gift card unless the savings are overwhelming that I just can't pass it up.

Shopping Portals

Most retailers allow for earning shopping portals when paying with gift cards (many disallow it when buying gift cards) but some do not.  Best Buy and (sometimes - depending on the portal and the time of day) Sears are exceptions to this.  With Best Buy you also don't earn Best Buy Rewards when using gift cards.  That could make a huge difference on the bottom line and make it not worthwhile to use a gift card.

Don't use gift cards if you are planning to use Discover Deals, use a Discover card!  If it doesn't go through they won't pay you manually and many times will claw it back.

My Calculus

I take all of this into account when buying gift cards.  I almost never buy gift cards to Best Buy.  I almost always buy gift cards to Macy's (unless I am using Discover Deals).

10% off at Staples?  Yes Please.  5% off - no thanks.

I have one piece of practical advice.  If you aren't great at tracking, don't hoard gift cards at all.  I only purchase gift cards when I am ready to make a purchase.  I check the price (including tax!) and buy a gift card for slightly less.  If I need to make a $500 purchase, I will buy a gift card for $490 (or whatever is closest to $500) but not $510 even if I will save 2-3% extra through buying the larger denomination.  When I'm done with the purchase, I want to forget about that gift card.  Otherwise it goes into my spreadsheet.  Did I mention that I hate updating that spreadsheet?