Lesson 2: Avoiding sticky situations with gift card reselling

No one wants to lose money! That was the biggest concern we had going into gift card reselling as newbies. We wanted to avoid that and other sticky situations like:

  • Not having enough money to pay off our credit card bills.
  • Being stuck with a bunch of gift cards that love you so much, they refuse to be sold.

We think you might have similar concerns as well, so let’s address some of the potential risks involved with gift card reselling, and how we’ve managed to mitigate these potential perils.

Some of the challenges discussed below may be more relevant to Norma’s bulk buyer approach, while others are more likely for Ed’s hands-on process with gift card marketplaces.

Even though the concerns are real, they are very manageable and more than outweighed by the rewards!

The Concern: Waiting a long time to get signed up with a bulk buyer

It can be difficult getting connected to a bulk buyer. Most are limited on the number of gift cards they can sell which affects the number of sellers they approve.

Solution: While waiting to get into the network of a bulk seller, learn how to sell directly to a marketplace, like Raise, SaveYa, the Gift Card Mart, and Cardpool, just like Ed. You should have multiple ways to liquidate your cards anyway, so start now.

Tip: One thing to note with selling direct: be wary of experimenting with unpopular brands. These may take forever to sell or may be taken off the list completely.

The Concern: Capacity and price fluctuations

Depending on the time of the year, capacity, and availability, prices can change. For instance, there may be a massive sale on a few select merchant brands. When that happens expect a flood of gift cards and a pressure for prices to be pushed down.

Solution: If you’re selling to a bulk buyer and they allow you to reserve capacity, do it! Don’t be hesitant to reserve extra in case you’re able to take advantage of more deals. Submit the purchase orders as soon as possible. Even though you may have reserved a certain number of gift cards, the current prices may change until you submit the order.

Whether you sell to a bulk buyer or directly to a marketplace, never ever buy so much that you can’t pay of the credit card bill when payment is due. Otherwise, you might be forced to sell at a loss.

The Concern: Uncertain portal payouts and Amex Offers

Sometimes the cashback or miles promised by a rebate or airline portal does not post, or worse, gets taken away. Other times, that Amex Offer you were counting on may fail to deliver the statement credit that was promised.

Solution: Don’t count your chicks before they hatch. While portal payouts can be great, never include them in your decision on buying a gift card. What works today may not work tomorrow. Although portals may track for points at first, these points may be taken back if a review shows that you did not follow the terms and conditions. One person I know had $750 in an account and then “lost” them all.

Always read the fine print before using an Amex Offer. Every offer has its own sets of rules, such as whether gift cards are allowed, what the minimum spend needs to be, validity dates, and whether it is an online or in-store only offer.

The Concern: Time drain

It’s very easy to become consumed and focus everything around this hobby.

Solution: Look for ways and means to save time even if it may mean a little less profit. When Norma first started, she would take advantage of an Amex offer and then wait to see if it would track on a portal. If so, she would do the same offer on a different card.

That ended up being too time consuming and it was harder to track which cards she had used for what offers. Now she does all the “same” Amex offers at the same time. Sometimes she will use the same portal if there’s been a history of points paying out, or she may use different portals. Either way, unless the store imposes a limit, she tries to use the Amex offer at the same time. If it pays, great. If not, the potential payout wasn’t included in her profit margin, so there’s no realized loss.

The Concern: Buyer shutdowns

The buyer you sell to goes bankrupt or decides to quit.

Solution: When it comes to investing, many financial sites suggest having an IPS (Investment Policy Statement). The goal is to stick with that and not base decisions on emotions. The same can be said with buying and selling Gift Cards.

Diversify. Sell to more than one bulk buyer, marketplace, or a combination of both. Have a set limit as to how much you’re willing to risk. For some people this may be $1,000. For others, it may be up to $5,000. I even know some sellers have had $30,000 or more  out to one buyer. Having more than one buyer and setting limits will help limit this risk.

Also, and this may seem a no-brainer, but submit your gift cards as soon as possible.

The Concern: Losing Gift Cards

Whether you’re buying in bulk via in-store or online, it’s easy to lose track of what you bought, what you have stashed away, and what has been sent to your buyer.

Solution:  We can’t stress enough the importance of organization. You have to keep track of what gift cards you’ve bought, what you’ve ordered, what’s been shipped, what’s been delivered, and what has been sold. This course will provide you some options and best practices to help you stay on top of things, even if you think you lack a single organizational bone in your body.

The Concern: Gift card getting hacked or balance differs

While this doesn’t happen often, it certainly is a risk. It’s also possible a buyer may say the balance is different than what you submitted.

Solution: Avoid buying from third party sellers. And never order more than you’re able to track. Have a system in place so you know exactly how much you ordered from which store and whom you sold what card to. Both of us share how we keep an eagle eye on our cards and inventory in the Getting Organized page. Copy what we do or adapt our processes to something that works for you. Either way, you need to have a system (is there an echo here?).

If there’s an issue with the balance, you, the seller, are responsible for making it right. It’s important to choose reputable bulk buyers and reputable sites. They want your business and don’t want complaints filed against them. Keeping your receipts and digital copies will help minimize the risk, but ultimately if something happens you are responsible.

The Concern: Getting in over your head

Contrary to what you may think, reselling gift cards add up fast. Before you know it, you’ve chalked up over $10,000 of gift cards because that deal was too good to pass up on!

Solution: Don’t pick the busy season to learn this game or if you do, go slow. Don’t try to do every deal.  Norma started in November and got caught up in the Black Friday buying frenzy. Along with learning the process, she had to learn different operating procedures from different buyers and different apps. While she had some spreadsheets in place for tracking, it soon become apparent they were not doable once her sales volume increased. Again, start slow and build up.

The Concern: Financial Hardship

Some people have gotten so caught up in this game that they’ve lost touch with reality. Shuffling $20,000 around no longer seems like a big deal. When they have problems floating money, they think they can just charge more for the cards. Here’s a reality check: the price you actually sell for isn’t always something you can control.

Solution:  Have a checks and balance system in place. This can be a significant other to help keep you grounded, setting a maximum limit, or sticking with a plan.

Set goals and revisit them periodically: Why are you selling gift cards? Is it to help meet minimum spend or to continue accruing points? Is it worth the time you spend doing it? Only you can answer those questions.

The Concern: Tax issues

Gift Card reselling is a business and you need to factor in how you report the activity during the tax reporting season.

Solution: This is going to sound both obvious and lame, but neither of us are qualified to give tax advice. Some people file a Schedule C as a sole proprietor and others set up an Limited Liability Company (LLC). You should consult your CPA to find out what works best for you.

However, if you use the options we share with you, you will at least be able to track how much you earn. That way, when you report the financial activity, it’s already there, waiting for you. Here’s a link that may help in deciding different accounting methods.

As you can see, even though there is some risk, most of them can be managed or avoided completely by having a plan, and then sticking to it.

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