I just discovered that GiftCardRescue buys open-loop gift cards.  They have been doing so since 2008, but I just noticed recently.

As far as I know (and they agree) they are the only secondary gift card marketplace to offer to buy any open-loop cards.  Discover cards are not included, but those are rare.  They will buy any non-reload-able card from any issuer, that has not yet been registered to a person.    They resell the cards on their site for a 4-7% discount.  Because you are not paying the additional up-front fee, this amounts to more like a 10+% discount, a real bargain if you are looking to buy one of these cards.  This is a much better option than buying them new from a store.

This is a big deal, as those cards in particular have been a big part of the problem when it comes to high fees and short expiration dates.  Now consumers have at least one option to get rid of those cards before they self-destruct.  It remains to be seen whether the federal gift card legislation as part of the Credit Card Reform Act of 2009 will truly squash these fees and expiration dates, or whether many loopholes will be exploited.

Another option to cash out of open-loop cards is to find a friend with a merchant account to run it through their physical or virtual card processor to extract the remaining value.  The merchant processing fee runs around 3% for most merchants.

About a month ago, I did a post on Plastic Jungle’s announcement that they were working with First Data, who runs a number of retailers gift card back end networks, to be able to start processing secondary gift card sales electronically rather than by mail, thus making the process more efficient and easier for customers.  I also theorized that retailers were willing to get involved in this because they realized that the days of free money via gift card breakage (what customers don’t spend) were over because states are now aggressively going after the money via escheat (unclaimed property) laws.  Retailers probably realize they have much more to gain by helping consumers spend the gift cards, because people often spend more than the face value of the gift card when they do visit the store, aka, the bump in sales.

Now, another gift card company, Wolfe, LLC, owners of the GiftCards.com and Swapagift.com sites, is also launching an electronic gift card secondary market they are calling GiftCodes.com.  They are also working with First Data and their FAQ pretty much solidifies my theories around why retailers are willing to let secondary gift card markeplaces handle their cards electronically, as they are pitching both lower escheatment and increased sales as retailer benefits:

Increase Sales / Reduce Escheatment: We enable motivated buyers to purchase your gift card and quickly spend those funds – putting cash in your register and off the balance sheet.

Since Wolfe, LLC’s GiftCards.com business is familiar with  the production of physical gift cards, while the GiftCodes.com site doesn’t say so explicitly, I suspect they might also be interested in issuing physical gift cards as well as electronic ones; not everyone will be comfortable with an electronic only gift card.

However, as we move closer to the reality of electronic processing in the secondary gift card market, I can’t help but wonder if things might take a different turn. (more…)

Take a look at the deal shown in the picture.

That’s right, for 2x$6.49, you get the razors and a $5 gift card.  This makes me wonder if the retailer knows something that most consumers don’t.  I don’t think we have to look to far or think too hard to figure this one out.

The type of card you would get is likely a rewards type gift card and is not subject to the same new gift card rules and, more importantly for the retailers sake, escheat laws (state’s taking possession of unclaimed property) and expiration dates that normal gift cards are, thus if you don’t spend it, Target gets to keep the money.

I am guessing the people are Target are pretty smart people and to have come up with a deal like this, they know that in the end, they will win.  This means, it is probably pretty safe to say that they expect a large portion of those $5 gift cards to not get spent.  It may be that $5 on a gift card is just little enough that people (a) won’t bother to spend it quickly, and (b) won’t pay attention to the fact that it likely has a short expiration date.

Don’t be swayed by what looks like free money.  In the end, it probably isn’t.

Update:  Looks like this is a regular thing at Target, as I found another one just like it.

I’ve often promoted that cash is a better alternative gift than gift cards, and here is a way to make a statement with your cash, the Consumerist anti-gift card.

Click here for the full-sized image to print out and include with your gift of cash.

MasterCard and Discover have new requirements that merchants who accept those cars support some new capabilities that could have a very beneficial effect on open-loop gift card usability.  Specifically:

Balance response transactions — For prepaid and gift cards, once the card has been used, the remaining account balance will be transmitted along with the authorization response. The remaining balance must be printed on the customer receipt, displayed on the Web page or point-of-sale terminal, or both.
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Partial authorization transactions — When a customer’s transaction amount exceeds the balance available on their debit, prepaid or gift card, instead of declining the transaction, a partial authorization for the amount available to the customer will be returned. This will allow the customer to pay for the remaining amount with another form of payment. This is called a split-tender transaction.
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Authorization reversals — An authorization reversal is a real-time transaction initiated when the customer decides that they do not want to proceed with the transaction, or if the merchant cannot complete the transaction for any reason. Authorization reversals free up the customer’s available balance on their debit, prepaid or gift card.

What this means is that:

  1. You will know the remaining balance on your gift card after you purchase something.  I can only hope this eventually leads to all merchants being able to determine your balance before you purchase.
  2. Merchants must support split-tender transctions, which would allow you to use the last $5.11 on your MasterCard gift card with cash or another credit card to buy something that cost more than that.
  3. When you try to use your gift card to purchase something but it fails for some reason, funds won’t be held on your card for weeks.

Merchants have until June 30, 2011 to comply with these new rules.  I would say it is a coin toss that after that time these things will actually be possible given the industry’s track record.

I just came across this story on Consumerist.com about the Walmart money card, which, by all appearances is a normal Visa prepaid gift/debit card.

The biggest problem with the card is its onerous activation scheme, which seems almost designed to prevent people from successfully activating the card, thus allowing Walmart to keep the money.

  1. You need to call to activate it, unlike other prepaids that are activated when purchased at the store.
  2. When you call to activate, you need the 14 digit activation code from the purchase receipt.  I can imagine that most of the time, people giving a gift card do NOT include the receipt.
  3. Activation requires that you give them all kinds of personal information, including your social security number.

Collection of personal information to identify the individual purchasing or using a card is something banks are required to do, so I can’t help but wonder if Walmart’s banking partnerships and in-store financial services are responsible for these activation requirements.

While I do like the idea of a post-purchase activation scheme, which could help reduce the rampant mail theft that occurs with gift cards sent through the US Postal Service mail, Walmart seems to have gone about it the wrong way.

Even without the activation requirements, these cards are a poor choice as they seem to be saddled with about every fee known to man.

The American Express gift card is probably a better choice.

Costco sells what are essentially gift cards, but they call them Costco Cash Cards.  You can buy them with a value anywhere from $25 to $1,000.

What makes them really valuable however, is that if you have a Costco cash card with any value on it whatsoever, you can shop at Costco without a membership.

How can you get them?  Have friend with a membership buy them for you, or some of the gift card resale sites carry them.

Incidentally, people selling these cards on Ebay obviously know about this benefit.  Otherwise, why else would they be selling these cards at more than their face value?

Imagine walking through an open-air bazaar in a third world country.  People are yelling at you from all sides, groping at you, making outrageous claims about how they have the best deals.  Someone might attempt to pick-pocket you.  Would you use your credit card at one of these merchants?  Not if you were smart, as there is a chance they would steal your number and ring up a bunch of charges.

Well, that happens to be a perfect analogy for the Internet.  In general, it is not a safe place to be and there are quite a few people out there that are trying really hard to scam you our of your hard-earned money.  That being the case, the general principles of doing ANYTHING on the Internet should be caution and an awareness that things are not alway what they appear.

Let’s look at an example.  I recently came across a website that appears to be a Q&A blog where someone asks a question about whether a gift card can be used online.  I’ve seen this question about 100 times because open-loop (Visa-type) gift cards can be very difficult to use for online purchases.  It is a very good question.

Ok, first red flag, the English is horrible.  Now, let’s look at the answers: (more…)

I’m not sure exactly how the main-stream TV news gets their stories, but in the last 10 days or so I have seen the websites of ten or more TV news stations reporting essentially the same story on gift card resale sites, a phenomenon I have not seen in the couple of years I have been covering gift cards.  I’m sure for every one of these stories I’ve seen, two more I haven’t.

The news stories are all very similar and report the same few gift card resale sites, leading me to believe they are all getting the same story from an Associated-Press type outfit, or maybe they just copy each other.

Our own site has seen a bump in visits over the last coupe of weeks; perhaps those stories are helping people to find us as well.



The latest scam to involve gift cards is a decidedly low-tech one.

It looks like someone crashed a bunch of weddings in California and stole the piles of gift cards (and cash) given to the bride and groom and has been doing so for several years.

The problem is that gift cards are usually about as untraceable as cash, but aren’t usually treated as such.   While it may be conspicuous for someone to walk out of a wedding with large boxes of gifts, raiding the gift card basket takes mere seconds and can net a crook thousands in gift cards and sometimes envelopes of cash.

This can be exacerbated by the fact that wedding receptions are often held in places and at times that are open to the public, and are often attended by a lot of people that don’t know each other, making it easy for a thief to steal while blending in.  And most people don’t expect theft at a wedding.  At our wedding one of our guests expensive digital camera was stolen.

Whether you are mailing your gift cards, receiving them at a wedding, or leaving them in your car, take the same precautions with gift cards as you would cash – make them look like something other than what they are, hide them, or guard them.

I have yet to do a comparison of all the major gift card secondary marketplaces of my own, but I recently came across an article that referred to a comparison of seven sites done by Consumer Report ShopSmart magazine.  Unfortunately I am unable to find the original article as the ShopSmart magazine website has limited content, probably to motivate people to subscribe to the paper magazine.

Nonetheless, the results are about what I would have expected.

Whether you are buying or selling gift cards, there is no clear leader on value, but two sites most often had the best prices – Plastic Jungle and Card Pool.  You best bet is to shop around on multiple sites to find the best deal.

Update:  Here is the video of the ShopSmart review of these sites.

Boy, a used gift card meta-site like I suggested the other day would sure come in handy.

I feel for the government, I really do.  It is well known that terrorists, drug gangs, and other criminals are using prepaid debit cards (including gift cards) to launder money and circumvent financial reporting rules.  But do we really need draconian rules in place that will make buying a prepaid card of any type a huge hassle and infringe in the legitimate privacy of individuals?

Right now there is a huge disparity between banks and non-bank entities when it comes to purchasing prepaid cards.  You can buy a $500 gift card from your local mall or Safeway without any reporting, but a bank will likely require you to have an account there to purchase even a $25 prepaid card, so they can identify who you are.

The Treasury Department recently proposed new rules for prepaid cards, which were mandated by the Credit Card Act of 2009.  Specifically, they are proposing that non-bank entities selling prepaid cards:

  • File suspicious activity reports (SARs) with the government on suspicious activity of more than $2,000.
  • Collect customer information anytime a card is reloaded at someplace other than a bank.
  • Maintain transaction information.

For the next 30 days (as of June 28) the public can comment on the proposed rules.

Most troubling is the provision that requires reporting  anytime a card is reloaded.  I know a few people that use these reloadable cards because they have a strong sense of a right to privacy and don’t want their personal spending habits picked through by either hackers or warrantless government requests.

My biggest concern though is that this represents a slippery slope towards total reporting on every prepaid card purchase, essentially treating everyone like criminals.  As an example, while Federal law requires only reporting of cash transactions over $10,000 by banks, one of my banks recently gave me the FBI treatment when inquiring whether a cash withdrawl of less than $10,000 was an attempt to get around the financial reporting requirements.  Get that, the bank was not required to report the transaction but was giving me the once over anyways to cover its butt.  We could see a similar effect with the new prepaid card reporting rules, where some retailers figure they will cover their butts by requiring personal information on ANY prepaid/gift card purchase.  This also means that if you are a business buying 30 $50 gift cards for your employees, you will be suspected of criminal intent automatically.

On the bright side, if personal information was required for EVERY purchase of a prepaid card of any kind, it would be a lot harder for companies to claim unspent funds as breakage and for states to co-opt breakage funds as unclaimed property which would never likely be returned to their rightful owners

Also on the bright side, if personal information was required for EVERY purchase, perhaps people will be less inclined to purchase gift cards and I will receive less of them and more real, thoughtful gifts.  Along similar lines, I haven’t bought Sudafed since they started asking for my ID to buy it.

Anyone who has tried to use up the last few bucks on their open-loop gift card knows that most retailers don’t support split tender transactions, much less even know what one is.  A split tender transaction is where you pay for something using two different kinds of payment, such as a few dollars from your gift card and the rest in cash.  Asking a retailers to do a split tender transaction is a sure way to get looked at cross-eyed.

Well, I hadn’t thought about this much before coming across this story, but apparently split tender transactions are a problem online too.  I have an online storefront myself and the off-the-shelf software I used to create the storefront doesn’t support any type of split tender transaction, such as paying with multiple credit cards.  I suspect brick-and-mortar retailers have a similar problem with their POS systems; they just aren’t made to do split tenders.  Interestingly enough, restaurants are one place where split tenders are VERY common, as checks are routinely split across multiple credit or debit cards, because, well, they have to.  Customers would rebel if restaurants didn’t allow them.

The real problem is not that retailers, whether brick-and-mortar or online, don’t support split tender transactions.  The problem is that issuers of open-loop gift cards refuse to acknowledge there is a problem with customers getting the last few dollars from their gift cards.  A common retort to a suggestion of a problem is to point to a split tender transaction as an easy way for people to completely use up their card, when this clearly isn’t possibly in the vast majority of circumstances.

I’ll file this one under scams.

Apparently inComm, the company behind the issue of Vanilla Mastercard prepaid gift cards accidentally issued some cards that when activated, had no limit on them and allowed the holder to spend way past amount the cards should have been limited to.

This is the first I’ve heard of a glitch like this for such a prepaid card.

Apparently some thieves became aware of the glitch and started buying the cards and using them to purchase thousands of dollars of electronics. About five people were arrested for knowingly using the cards to spend more than they should have.

However, I suspect at least some of those accused of fraud will have a perfect alibi – that they were given the cards and had no idea how much was on them, as you have to go out of our way to determine the remaining balance.

Cupertino-based Mobeam has created a device called Numi that is specifically made for holding retailer loyalty card (Ralphs club, etc.) information which it cam beam using an LED into a checkout scanner, thus allowing you to carry one key faub size device on your keychain rather than a bunch of credit-card sized loyalty cards.

Where this gets interesting is when the Numi gets the ability to carry gift card data as well, which would allow people always have their gift cards with them when an opportunity to spend them comes up.

Not a bad idea, but the company has no plans to support this until it has partnerships with retailers set up.

Personally, I’d rather have my mobile phone carry my e-gift card data and scan it at a checkout with an on-screen barcode, much like I am able to do when I travel with some airlines, rather than carrying a boarding pass.  That would save me from having yet another thing on my keychain.

I often criticize gift cards as being very impersonal gifts that shows you put little thought into what you got the recipient.

Well, perhaps there is a way gift cards can actually be made more personal.

My brother-in-law’s wife makes all her own cards – birthday, holiday, etc.  They are truly amazing creations and she makes each one especially for the person she gives it to.

Along those lines, when I came across this blog post showing how to make your own gift card holder, I thought, not a bad way to make it a little personal and show someone you actually thought about the gift a little.

New Hampshire is a great state.  They have no state income tax and no state sales tax. Their motto is Live Free or Die.

And in New Hampshire, gift cards and gift certificates with an original face value of $100 or less are not allowed to expire.  Ever.

We just became aware of a new scam involving open-loop gift cards.

Gift card scams involving closed-loop, or retailer specific gift cards (like Target or Wal-Mart) are common.  Thieves can easily get the information necessary to identify and duplicate the card from the outside of most of these type of gift cards, which are displayed on racks accessible to anyone in the store.  They wait for the gift cards to be activated and then quickly duplicate them and drain them, before the purchaser has a chance to use them.

But this hasn’t been a problem for open-loop (Visa/MasterCard/American Express) gift cards as the information necessary to identify the gift card is well hidden away inside the tamper-proof packaging.  Before we discovered this scam, we were not aware of ANY verified repeatable scam involving open-loop gift cards that didn’t involve rogue store employees, a relatively small risk.

But it seems that thieves have found a new way of scamming these cards.  By applying a sticker to the back the replaces the bar code that is there, which is used in activation, they can redirect the activation over to another card, one they have possession of.  When the purchaser tries to use the card, they find that it has not been activated.

If you buy an open-loop gift card from a place in a store that is easily accessible to anyone, be sure and inspect it carefully to look for any indication the activation bar code on the back of the packaging has been replaced.  If you can lift a corner of this sticker off and see another one underneath, report it to the store employees.  Your best bet is to buy ANY gift cards only from stores that keep them behind the counter.

As evidenced yet again by this “7 On Your Side” article, when something goes wrong with a gift card that shouldn’t have happened, such as the card not getting activated correctly, and the issuing company is dragging its heals, or flat-our refusing to help you, the best way to get results is to contact the consumer advocate at your local TV station or newspaper.  It is amazing how a call from one of these folks, and the threat of negative publicity, can get a company immediately off its butt.

Update:  Here is another story about an Amex gift card not properly activated at purchase from a Duane Reade store.  This does in fact seem to happen occasionally, so always check your cards to make sure they are properly activated the first chance you get.

As evidences by this recent fiasco experienced by TXU Energy customers, bankruptcy of companies that issue gift cards is still a problem.  Customers who were promised a free gift card for switching to TXU for their electricity service quickly found out the card didn’t work, because the company behind them, Spring Box Services, had gone bankrupt.   This is a case where our advice to spend your gift card immediately, would not have helped.

While in this case the customers didn’t have a choice of who the gift card was from, perhaps sticking to gift cards from stable, large retailers is a your best bet.