Innovations and Payment Systems

Using gift card exchange sites to stretch your holiday budget


Gift cards have become so popular that a secondary market is booming. While you probably wouldn’t give mom a used sweater for the holidays, you might be able to save money by buying other people’s unwanted gift cards at a discount

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Santa’s bag gets lighter every year as more people request gift cards. In fact, gift cards have become so popular that a secondary market is booming. While you probably wouldn’t give Mom a used sweater for the holidays, you might be able to save money by buying other people’s unwanted gift cards at a discount.

A good first stop is, an aggregator site that buys and sells gift cards and lists deals from more than a dozen gift card discount sites. At press time, GiftCardGranny listed more than 36,000 gift cards for sale from 538 different merchants at an average discount of 13.7 percent. Shipping is almost always free and if you don’t see a card you want, many sites offer email alerts to let you know as soon as that card becomes available.

The cost of a secondhand card depends a lot on how popular it is. During the holidays, many shoppers are looking for gift cards from toy retailers such as Toys R Us, says Shelley Hunter, content manager, spokeswoman and “gift card girlfriend” for Other big sellers are cards that can be used for a wide variety of merchandise — those from retailers such as Target, Wal-Mart and JC Penney, Hunter says.

See related:  7 things you need to know about gift cards

No surprise, the popular cards usually carry the smallest discounts. A recent spot check of deals listed on showed Wal-Mart cards discounted 2.6 percent, Target cards marked down 3.9 percent, Toys R Us going for 5.4 percent off and JC Penney cards discounted 12.1 percent.

At the same time, Petco gift cards were going for 16.3 percent off and Cold Stone Creamery for 23.1 percent off. “The best discounts can be found on cards that maybe aren’t as widely popular, such as restaurants, service providers and select clothing retailers,” says Luke Knowles, CEO of

If you want a popular card, is it really worth the hassle to save only 5 percent or 6 percent? Yes, says Knowles, noting that savvy shoppers stack the discounts with coupons and sales. “We believe paying less than face value for anything is a good thing.”

Read on for more tips on buying and using discounted gift cards.

Consider using vs. giving

Think twice about giving the discount gift cards themselves to people. They may not make the best gifts. “Some do look like they’ve been sitting in a wallet,” Hunter says. “The card is still good, but it’s not presentation ready.”

Another issue is the card value — most people give new gift cards in round dollar amounts such as $10, $25, $50. On the swap sites, you may see cards with odd dollar amounts such as $19.22 or $86.55.

“If you got a gift card from someone for $87, you’d think ‘Hmmm, what happened to the rest of it?'” Hunter says.

Instead, you may want to use the gift card to purchase merchandise that you give the recipient. Hunter even once bought a gift card, used part of the balance to buy a gift and the remainder to buy a new gift card — though that may not work at all retailers.

Be wary of fraud

Fraud on gift card exchanges usually involves cards that are stolen or counterfeit or that do not have the value represented to be in the card, says attorney Steven J.J. Weisman, professor at Bentley University and editor of the security blog Scamicide.

Reputable sites have practices in place to minimize those kinds of fraud. For example, when buys a card from a consumer who no longer wants it, the consumer has to provide a credit card number, Hunter says. “If there is something wrong with the [gift] card, we’re going to charge that credit card number. We have a way to recover that money.”

In the most common scam, however, thieves steal credit card information, use it to buy gift cards and then exchange those cards for cash via swap sites, says Knowles. Hunter says her site has safeguards against those kinds of incidents, too. She won’t go into specifics for fear of tipping off fraudsters, but says has a fraud rate of less than 1 percent. “We have patented fraud protection that we have licensed to other gift card resellers because of its effectiveness,” she says. “Fraud is very low and something we actively and continually work to eliminate.”

In fact, if you’re buying multiple gift cards from an exchange for the first time, your credit card issuer may issue a fraud alert. That’s one reason to make sure you don’t wait until the last minute to buy from an exchange.

Your best defense against fraud is to check out a discount card site before you use it. Read online reviews and check with the Better Business Bureau and the consumer protection division of your state’s attorney general’s office to see if there have been complaints.

Be especially careful with cards sold through general resale sites such as Craigslist. Katherine Hutt, spokeswoman for the Better Business Bureau, says her organization saw one recent scam in which a seller bought a $1,000 gift card through Craigslist for $750. “The buyer met the seller and actually called the number on the card to verify that it really had $1,000 on it, and it did,” says Hutt. “She handed over the $750, but when she went to use the card the next day, the balance was zero. Either the seller was a scam artist who had copied the number off the card and had used all of the funds before the buyer had a chance to spend a penny, or the card had been purchased with a stolen credit card and had been deactivated. Either way, the buyer was out the $750.”

Online auction sites are another danger zone. Weisman recommends avoiding them altogether. “My concern with online auction sites is based on the possibility of fraud through the sale of stolen or counterfeit cards,” Weisman says. “That possibility still exists with reputable sites, however, the legitimate discount card sites will provide a warranty that can effectively protect the consumer.”

Check out the warranty/guarantee policies

Weisman recommends making sure the discount gift card companies you’re considering are legit and then going with the one that provides the best price with the best warranty. Even among reputable sites, warranty policies can vary widely., which sells both discounted cards and conventional cards, guarantees its cards for 100 days. The buyer protection policies listed at GiftCardGranny range from 999 days to 10 days, depending on the website selling the card.

“Consumers should use the card before the gift card company’s guarantee has expired,” Knowles says. That could be tricky if you’re giving the card as a gift. A Consumer Reports poll in 2011 found that 25 percent of adults still had an unused gift card from the previous holiday season.

Buy early – but not too early

To make sure the card arrives in time for your shopping excursion or gift-giving occasion, buy it at least a week in advance, Knowles says. For e-gift cards and codes, the turnaround time is 24 hours or less, Hunter says.

If you’re planning to give the card as a gift, consider waiting until close to when you plan to give it so that you won’t use up the buying protection period with the card sitting in your closet.

Save even more

If you want to save even more money, buy gift cards at the end of January and beginning of February when the supply and discounts will be higher, Knowles says. “Gift cards are the most popular gift during the holidays and people who receive cards they don’t want are eager to exchange them for cash,” he says.

That’s also good information to keep in mind in case Santa brings you a gift card for a store that’s not your favorite.

“That’s why we created Gift Card Exchange Day on Dec. 26,” Knowles says, “To bring awareness to the option of exchanging unwanted gift cards for cash.”

See related: Layaway 2013: Survives recession’s end, but evolves, Best ways to redeem rewards points for the holidays, Three ways to curb pre-holiday money stress

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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