A gift card's value on the open market is not necessarily the same as its value as a gift.
We respond differently to cash than to gift cards. If I receive cash, I tend to treat it the same as all other money I receive. Mentally, it goes into my "income" pile and I'm just as conservative with it as I am with all of my other income.
On the other hand, if someone gave me, say, a Best Buy gift card, I have to spend it at Best Buy. The giver is saying "I want you to have a fun electronic something, but I want you to pick which one." I'm going to use it to splurge on something I want as opposed to something I need. (With that in mind, I find grocery store gift cards odd.)
It also wasn't obvious to me until the end that this was put together by people who have a product that compete with gift cards.
I think the "value on the open market" comparison is even more questionable than that. A market is only efficient if its transaction costs are low (and if there are few barriers to entry). If you're buying a gift card on eBay, consider the transaction. First, you need to think to go to eBay. (Had the idea occurred to you before this?) Then you've got to find the thing on eBay in a reasonable denomination, submit a bid, wait around a while to win the bid (possibly days, if you even win the bid, which you maybe-won't), pay the seller, wait a week for it to come in the mail, hope that you haven't been defrauded (possibly checking its balance), and then store it somewhere and remember to use it.
That's a lot more of a hassle than just getting it as a gift, storing it somewhere, and remembering to use it.
Is this where I bitch about those "cash" gift Visa and Mastercards? (The ones that are essentially a prepaid credit card with a fixed balance.) I've received a couple of them and they're so bizarre to me. First of all, they apparently cost $3.95, which is a 15.8% fee on a $25 card. (You would think Visa and Mastercard would be so happy to have more cards out there causing 3% transaction fees to happen that they'd give the cards away at face value).
Then they're actually less practical than cash. You have to spend exactly the card balance to use them effectively. So if I swipe it at Starbucks a few times until it's down to $1.49, the next transaction will simply be declined! I'd have to ask the barista ahead of time to split the transaction and charge exactly $1.49 to the card (so I have to mentally track the balance or call Visa/MC every time I use it). I'm guessing it's more likely that people reach the point where the card is declined and then throw it away, with Visa/MC pocketing the remains.
If you want to use it online, you have to go to the Visa/MC web site and register it (provide your personal details) so that the card is associated with billing details. Lovely side effect: they get your personal contact information to spam you with.
For the love of all that is rational, please don't give me these cards, I'd much rather have $28.95 cash than $25 + extra hassles. The best use of these cards I could come up with is converting them to a gift card at a particular store you actually like. Store gift cards have correct overflow semantics - the full balance of the card will be used and the register will ask you to come up with the difference.
The way to play the cash giftcard game is to take advantage of the cashback of the paying card. For example, Discover had a promotion on CyberMonday that paid $100 if I spent at least $1000 on that day. I didn't have anything pending to buy on that particular day, so I bought an $1000 Amex giftcard paid with the Discover card, pocketing the $100 cashback and had the $1000 giftcard to use in daily usage.
There are a lot of niche use cases for them which most people don't see. For example, businesses use them to pay contractors when they owe more than a certain amount in order to avoid tax liability / paperwork.
We didn't pull much data on them, but I think you can buy them at a discount as well.
They have interesting uses though, because they are effectively a credit card that you don't need a valid billing address for. Allows for fairly anonymous transactions.
Online they don't work, unless you get one of the few which allow you to fill in a real SSN matched to a real address, etc. -- at least in the US. If I recall correctly, it's due to a section of the Patriot Act. And apparently they actually verify the SSN+name now. I'm not aware of any prepaid credit cards that allow anonymous online purchases now in 2011, in the US.
You can set a billing address online or with a phone call and use it online. I did that a few times this year, in the US. (This was to get MLB.tv at an alternate out-of-market billing address.)
Their data gathering and thesis are flawed. Online selling price has little to do with value. If people were selling cash online they would not get 100% of the value.
Gift cards sold online could have been bought with stolen credit cards (seriously, watch out!). The person selling the cards will take well below the value because they didn't pay anything. The person buying the card is assuming a huge risk, the card may be with nothing.
The true value of a gift card lies in the eyes of the receiver. And like any gift you have to know the person you are giving it to. A $400 gift card for Agent Provocateur is worth a lot to a girl who loves lingerie and appreciates $200 bras, but it's not worth much to someone who only likes functional cotton underwear. I like computers, but a $400 gift card to the Apple Store would be useless to me because I don't want to spend the extra $800 it would take to get a computer. Even a $10 Starbucks card is worth nothing to someone who only drinks Diet Coke, but worth a full $10 to someone who drinks Starbucks every day.
Like any other payments company, we face transaction fees.
We're pushing a bunch of changes tonight since we're migrating to a new payments system, but afterwards I'll pass you information that should let you purchase without fee.
Don't most gift cards their money on the interest the money earns while the company holds it (iirc float)? and then on the unclaimed cards, if they're allowed to expire?
I liked the opertunity to win this card, However I was not very happt paying a dollar more than the card was actually worth. I was locked in on the bid so had to pay for it.
I will be more careful in future biddings on eBay and that's for sure!!
If your mental model of the world does not immediately suggest that that commenter exists in spades, your mental model of the world needs an update.
I know a few cases where people have sold gift cards above market value. Mostly it's because the purchaser is unable to buy from the shop because of their location, credit card brand or other enforced block.
Many online games for instance block purchases from Israel due to the large amount of fraud. Israels will then purchase game cards on ebay (often above market value) from people who bought them in North America.
People put "mystery boxes" on ebay, stating that in the box there will either be something worth $100 or $1. Sometimes its cash. IIRC the bidding goes far above $1
The problem with Amazon is that you become very, very aware of the items not on Amazon. I recently got an Amazon gift card and realized that I can't get an iPhone.
Some online vendors (like iTunes) won't accept your credit card unless you're from the US. To go around this you have to pay a bit extra (usually ~5%) to be able to get a gift card and use it in your account.
Who is going to be giving used gift cards this year?
But more seriously, someone needs to make a firefox plug-in or app that automatically searches for discounted gift cards when I happen to be browsing Amazon, etc..
And there needs to be a search engine for these gift cards, because I want to buy the 40% off Harbor Freight variety.
I thought the uptake was going to be that the whole concept of a gift card is ludicrous. Instead I'm sold on using a different kind of gift card.
Don't get me wrong -- I often prefer getting gift cards to getting something useless, but they just seem like a cover for not knowing me very well. I suppose they make sense when there's likely to be an asymmetry in charity. But if you're going to give cash, why give at all? What use is it to exchange $50 bills?
The best explanation I've ever heard for gift cards is that they force the recipient to spend money on "something fun" rather than being strictly practical. Some gift givers would rather know you went out for a nice meal or bought a new tie or something than that you used their gift to buy gas or everyday groceries. I'm not sure I agree with this sentiment, but I can see where it's coming from.
The big thing that flies in the face of this is that people spend tons of money on gas, grocery, and Wal-Mart cards. Some of those might be for underbanked people, but many aren't. With Amazon, for example, I'd guess most people just instantly apply the credit to their account and don't think about it after that.
There's a thoughtfulness treat-yourself aspect to them, and there's a practical make-sure-this-can-be-used aspect. The data seemed to point that the practical aspect is missing, the gift cards are valued less in secondary markets than their more practical counterparts.
Say a relative sends you a gift card for big kids birthday, throught Facebook, since that's the Internet now. You attach it to your amazon account, and then poof, little kids diapers on subscribe and save come off of the gift card.
Ita now happened twice in this house.
There's no way (currently) to remove a gift card from a subscribe and save order Once you have a balance on your amazon account.
So, hey 7yr old, your uncle just accidentally bought you diapers for your birthday. Well make it up to you.
While I love the interactive infographic my favorite part of this is referring to Frederick's of Hollywood as a place "no one has heard of". My girlfriend sends me at least 4-5 links to items on that website every few weeks. Where can I get one of those gift cards for 50% off?!
Big box stores give gift cards in return for falsely returned items (get a receipt, walk out with the same thing twice; this is why the guy at the door wants to mark your receipt with a market.)
So of COURSE people are willing to take a lower price for their $100 gift cards - they paid less than $100.
My theory is that the gift card economy is a shadow economy for people who need to use plastic for whatever reason but are unable to open accounts (lack of documentation I guess?)
The value I place on a gift card bought online has to be adjusted for trust and convenience.
If I'm buying an Amazon gift card online from Amazon, I will happily pay $100 to get a $100 gift card. If I'm buying an Amazon gift card from someone on ebay, of course I'm not going to pay $100 for it. Why would I when buying the same card from Amazon would be far more convenient and Amazon has proven itself far more trustworthy to me than any random ebayer?
However, this reduction in value due to a decrease in trust & convenience says nothing about the actual value of that gift card to me or the receiver. I'm simply trading some increased risk of being ripped off for some of the cash value of the card.
We respond differently to cash than to gift cards. If I receive cash, I tend to treat it the same as all other money I receive. Mentally, it goes into my "income" pile and I'm just as conservative with it as I am with all of my other income.
On the other hand, if someone gave me, say, a Best Buy gift card, I have to spend it at Best Buy. The giver is saying "I want you to have a fun electronic something, but I want you to pick which one." I'm going to use it to splurge on something I want as opposed to something I need. (With that in mind, I find grocery store gift cards odd.)
It also wasn't obvious to me until the end that this was put together by people who have a product that compete with gift cards.