OK, we need to talk about gift cards.
What a racket, man. It’s a cash cow so big you can hear it mooing from the moon.
You buy a gift card for your uncle’s birthday—let’s say a $50 card to use at Target. Right off the bat, he could misplace it or file it away and never use it. That, in fact, is exactly what happens to about 20 percent of all gift cards, according to Consumer Reports. Your $50 now belongs to Target. For the store, it’s 100 percent profit.
OK, what about when your uncle does buy something with your card? Well, Target comes out ahead then, too. He’ll have a hard time spending exactly $50. So either his purchase comes in under $50, in which case Target gets to keep the rest of that $50 for free—or he buys something that costs more, in which case Target does a happy dance.
As the gift giver, of course, what your uncle does isn’t your concern. You’ve done your duty. You’ve given him a birthday gift, and you’re off the hook. (There’s no shame in it, either; a majority of Americans say they like getting gift cards.)
But what probably hasn’t occurred to you is how you can profit from the gift-card racket. You can make money on them and save money on them. You just have to start viewing gift cards as something more than a lazy person’s last-minute gift idea.
How to get cash for a gift card you’ll never use
What if you’ve been given a gift card? Maybe one that you doubt you’ll spend because it’s a store you don’t use?
This is why you should know about CardCash.com. It’s a website that buys people’s gift cards. With cash. Not full value, of course, but more than zero (which is what they would be worth sitting in a drawer). Depending on how popular your card type is, you might get 65 or 90 percent of its value in cash.
So if you’ve been given one and you’re pretty sure you’ll never use it, by all means: Sell it.
(CardCash.com is the largest such card-exchange site, but there are many others, including Raise.com, CardPool.com, GiftCardGranny.com, and GiftCardRescue.com.)
Earnings ballpark: $150 a year
$150 = Two $100 gift cards, sold for $75 each
Buy gift cards for yourself, pay less for things
You just learned about CardCash.com and CardPool.com. Now take it a step further: If you spot a card there for a store you use, buy the card for yourself and simply enjoy the savings. Take your pick. Barnes & Noble, CVS, Gap, Lowe’s, Target, Banana Republic, Best Buy, Bed Bath & Beyond, GameStop, Home Depot, Macy’s, and on and on.
The gift cards sell for less than their face value. So you can buy a $100 iTunes gift card for $85, for example, or a $40 Starbucks card for $32. If you’re in the market for a gift card, it’s like free money.
Savings ballpark: $150 a year
$150 = 15 percent discount on $1,000 worth of cards
These 14 states make gift cards even more useful
Don’t you hate it when someone gives you a gift card but it expires before you’ve had a chance to use it?
Fortunately, Congress has your back. Thanks to a 2009 bill called the Credit Card Accountability Responsibility and Disclosure Act (the “CARD Act,” get it?), you have certain protections. One is that cards can’t expire for five years.
Many states have passed even juicier laws—like California’s, which says that if there’s a small amount left on the card, the store has to give you cash for it.
Just so you have it, here are the 14 states that have done the federal law one better (or several better):
• California. California has the strongest gift-card laws in the country. Gift cards are never allowed to expire. And if there’s less than $10 left on a card, the store has to give you cash for that remaining value.
• Colorado. If there’s less than $5 of value on the card, the store has to give it to you in cash.
• Connecticut. Gift cards never expire.
• Florida. Cards never expire.
• Maine. Cards never expire. If there’s less than $5 of value on the card, the store has to give it to you in cash.
• Massachusetts. Cards can’t expire for seven years. If there’s less than $5 of value left on the card, the store has to give it to you in cash. (For non-reloadable gift cards, you can get cash for anything that remains under 10 percent of the card’s value.)
• Minnesota. Cards never expire.
• Montana. Cards never expire. If there’s less than $5 of value on the card, the store has to give it to you in cash.
• New Hampshire. Cards under $100 don’t expire. For values over $100, they don’t expire for five years.
• New Jersey. Cards never expire. If there’s less than $5 of value on the card, the store has to give it to you in cash.
• North Dakota. Cards don’t expire for six years.
• Rhode Island. Cards never expire. If there’s less than $1 of value on the card, the store has to give it to you in cash.
• Vermont. If there’s less than $1 of value on the card, the store has to give it to you in cash. After the card has expired, you can get any unused value back in cash.
• Washington. Cards never expire.
Of course, there’s always fine print; for example, these rules usually don’t apply to prepaid phone cards or bank cards that you can spend at multiple stores.
But still, all of this should teach you two lessons. First, in your state, your gift card might be even more valuable than you thought.
Second, California’s pretty cool.
The kind of gift card everybody loves
The problem with giving people movie-theater gift cards is that they might not be moviegoers. The problem with giving someone a Starbucks card is that she might not drink coffee. The problem with giving a Macy’s card is that there may not be a nearby Macy’s.
Here’s a little tip: Give your lucky loved one a gift card that’s redeemable anywhere. Any store, any restaurant. Toward pizza, or plane travel, or paint jobs. Anything.
They’re prepaid Visa cards. You can get them at drugstores (Walgreens, Rite Aid, Duane Reade, CVS), gas stations (Chevron), convenience stores (7-Eleven, Cumberland Farms), banks (Chase, PNC Bank, U.S. Bank), RadioShack, and grocery stores.
You can also get them online. At GiftCards.com, for example, the card costs $3 or $4 extra, but you can have it printed with a photo of your choice, which makes it a much more personal gift.
(There are also prepaid MasterCards and American Express cards, but they’re much less common and harder to find. The AmEx cards are available pretty much only online—at americanexpress.com/gift-cards.)
The beauty of prepaid gift cards is that you can use them just like regular credit cards, to spend wherever you like. They’re as universal as cash. (Actually, more universal, since you can spend your Visa card on the web, too.) And yet they don’t have the impersonal, “I didn’t put much effort into this” feel of an envelope full of bills.
They don’t expire, and there are no fees.
Earnings ballpark: The rosy glow of giving a really cool, useful gift
How to use up the final dollars of a prepaid gift card
Suppose you have a Visa gift card for $50, and you’ve used up most of it. There’s still $4.85 of value left on the card. (How do you know what the card’s remaining value is? You call the 800 number on the back.)
And let’s say you don’t live in one of the states where the store has to give you cash for what’s left on the card.
What are you supposed to do—throw away $4.85?
Not at all. Here are several clever ways to wring the last few drips of value from that card.
• Pay your utility bill with it. Some gas, electric, cable, and water companies let you pay your bill by credit card. Why not toss that last $4.85 at your bill? Clean and simple.
• Go out to dinner. Restaurants routinely let diners split the bill among multiple credit cards. So you can use up what’s left on your prepaid card—and pay the rest of the bill with your real credit card.
• Use it up at a big-name store. At national chains like Target, Whole Foods, and Home Depot, you can split a purchase among multiple credit cards. Swipe your $4.85 gift Visa first; the register applies that amount to your purchase and adjusts the total on the screen. Now pay the remainder with another credit card. (If there’s no automated swiping system, you can usually just ask the cashier to do it. That works in gas stations, too.)
• The classic Amazon-gift-card trick. Amazon gift cards have two huge advantages. First, you can spend them on anything Amazon sells (which is just about anything ever made). Second, you can buy them in any weird amount—even $4.85.
So the trick here is to use the remainder of your gift Visa card to buy an Amazon gift card online (which can be just a credit to your own account). Presto: You’ve converted those money crumbs into a discount on the next thing you buy.
• Swipe the cards into a Square reader. You can also convert those leftover card amounts into plain old cash, using a free Square reader, described next.
Savings ballpark: $30 a year
$30 = Reclaiming an average of $5 on each of six prepaid Visa cards
Convert prepaid Visa cards into instant cash
In modern society, prepaid credit cards have become a popular go-to gift for birthdays, Christmas, graduations, and other rites of passage. It’s not unusual for a newly minted high school graduate to wind up with a small stack of them.
Wouldn’t it be great if you could wave your wand and transform all those cards into money in your bank account, without having to go anywhere or sign anything?
You can—with a Square reader.
A Square card reader is an attachment for an iPhone or Android phone. (You order one from SquareUp.com; it’s free.) It plugs into your phone’s headphone jack and turns it into a credit card reader. And it lets anyone accept credit cards! Kids who mow lawns. Piano teachers. Plumbers. You. Even your teenager.
Square takes 2.75 percent of each credit card swipe and deposits the rest into your bank account. For some people, that’s a small price to pay for the ability to eat up stray gift cards—before they get lost in the couch cushions. —Daniel John Bergsagel