Stocking Up Gift Cards When On Discount- A Good Idea ?

[skchamp]

Hi,

I guess we all are aware of the fact that many a times discounts are available on gift cards of various retailers (both online and offline).

Is it a good idea to stock up on gift cards when they are available for discount? The discount is not very high most of the time but it feels nice to save some extra money.

What strategy do you follow for it? Mustachians please give your opinion about the same.

[thedayisbrave]

Yes, but if and only if you KNOW with 100% CERTAINTY that you will shop there or already do.  It's pointless to buy gift cards just because they're "on sale' if you never end up going there.

[life is short]

I bought about $800 worth of Amazon gift cards when I had 10% cash back on my Chase card. We use amazon enough that it was definitely worth it. You just have to be careful not to buy more stuff because you have "free money" or whatever. I also wouldn't buy more than maybe 6 months max of what you spend at that particular store as you'd probably be better off just saving that and I wouldn't want that much tied up in gift cards.

[lbmustache]

I bought about $800 worth of Amazon gift cards when I had 10% cash back on my Chase card. We use amazon enough that it was definitely worth it. You just have to be careful not to buy more stuff because you have "free money" or whatever. I also wouldn't buy more than maybe 6 months max of what you spend at that particular store as you'd probably be better off just saving that and I wouldn't want that much tied up in gift cards.

I agree. I think Target had their gift cards for 10% or 15% off during the holidays, I bought about $200 worth of cards since I shop there anyway, and worst case I can always give one as a gift.

[Inaya]

I bought about $800 worth of Amazon gift cards when I had 10% cash back on my Chase card. We use amazon enough that it was definitely worth it. You just have to be careful not to buy more stuff because you have "free money" or whatever. I also wouldn't buy more than maybe 6 months max of what you spend at that particular store as you'd probably be better off just saving that and I wouldn't want that much tied up in gift cards.

I did the same because I knew I'd be buying some Xmas stuff off there, and we use Amazon PrimeNow for some grocery deliveries (a godsend when it comes to bulky, heavy things like kitty litter when you're carless).

[Vanguards and Lentils]

I love this question because it can be formulated mathematically. I was thinking about it recently because Chase freedom will have 5% cash back at grocery stores from April-June this year. Towards the end of June, I plan on buying a gift card for my grocery store to use in July, August, etc.

Basically there's two competing factors: the immediate savings gotten by purchasing at a discount, and the lost investment growth since the money is now "locked up" in a gift card, instead of earning interest along with your investments. How much you should purchase in a gift card depends on your investments growth rate, and the discount you get on the gift card. Obviously, if you invest your money very well, you should buy less in gift cards, and instead just draw money out of your investments on a need basis. And if you can get a really high discount on a gift card, say 20%, then you would probably buy more of the gift card.

Here's a spreadsheet I made recently with parameters you can change to help you decide.

Simplifying assumptions:

• You invest any extra money (If I wouldn't have done anything with that money, just ignore all this and buy a giant gc...) and it grows at a consistent APR that is known
• I make one purchase per month equal to my whole budget
• The discount % of your gift card should be calculated carefully. If I must pay for my gift card using cash/debit, and the discount is 10%, I actually consider that roughly 8% because my alternative is buying groceries normally with my 2% cashback credit card

Example calculation: Your grocery budget is $100/month, and you have the opportunity to buy a $300 grocery gift card at 10% off, which will last 3 months. Your investments grow at 5% per year, which corresponds to a monthly interest rate of 0.407%. Let's see where we end up, if we start with $300, in the case that we (i) buy the gift card, and (ii) don't.

In case (i), you buy the gift card, spending $270, and leaving you with $30 in your investment account. That $30 grows to ~$31.28 at the end of three months.

In case (ii) there's a little more computation necessary. Pretend we're beginning January 1.
January 1: Spend $100 on monthly grocery trip, leaving $200 in my account.
January 31: That $200 grew to $204.36 after one month.
February 1: Spend $100 on monthly grocery trip, leaving $104.36
February 29: My account grows to $106.35.
March 1: Spend $100, leaving $6.35
March 31: It grows to $6.40

So with these numbers, I should buy a 3-month's supply of the gift card. The spreadsheet I made is basically the above computation with the guts hidden.

[bballfreakunc]

I actually use raise.com a lot. For example when I needed new shoes, I got an 20% gift card for Dick's Sporting Goods. And recently I've been doing a lot of work around our house so I got a 13% off Lowes gift cards. Couple that with the 2% credit card rewards, it can't be beat. Also raise has 100 day guarantees that the value on the card is correct as purchased. Overall I've been really happy so far.

I'll caveat with what others have said and only buy gift cards for what you need to spend anyways. 

[Ebrat]

I actually use raise.com a lot. For example when I needed new shoes, I got an 20% gift card for Dick's Sporting Goods. And recently I've been doing a lot of work around our house so I got a 13% off Lowes gift cards. Couple that with the 2% credit card rewards, it can't be beat. Also raise has 100 day guarantees that the value on the card is correct as purchased. Overall I've been really happy so far.

I'll caveat with what others have said and only buy gift cards for what you need to spend anyways.

I love Raise.  They also have an app, so I've actually bought gift cards from them while standing in the store where I'm going to use the gift card.  They also send out emails every weekend with a set of stores that's an extra 5% off that weekend.

[electriceagle]

Be careful about gift card accounting.

I got a gift/merchandise card from Lowes some months ago. When I went to use it, I was told that it was empty.

I've written two paper letters to Lowes asking for an accounting of the transactions on the card; both times, they have dodged. The first time, they sent me a coupon and the second time they sent me a letter about my "return being denied". Which is not what I asked them for.

I'm starting to think that some companies which offer gift cards can't account for the transactions on them. Clearly Lowes is one of these.

[MillenialMustache]

Yes, I mostly use Cardpool. My DH recently had a $500 purchase at Bass Pro and we saved $80 by buying all that in gift cards. I regularly buy Home Depot ones for my DH $100 at a time, and once he uses that we get another one (those range from 6%-12% off). We like to eat out, and I buy restaurant gift cards at 6%-20% off regularly. I normally have 2-3 $25 ones in my purse at any given time. I also take advantage of the deals around Christmas that the restaurants themselves do. One of our favs is Texas Roadhouse - we bought $200 in gift cards and they gave us $70 in coupons for dollars off our purchase ($15 off total purchase, etc). I see it as an easy way to save money.

I'm not saying it won't happen, but I have spent more than $4,000 with Cardpool and every gift card has worked correctly, so they have a good track record with me.

[Gin1984]

Yes, I mostly use Cardpool. My DH recently had a $500 purchase at Bass Pro and we saved $80 by buying all that in gift cards. I regularly buy Home Depot ones for my DH $100 at a time, and once he uses that we get another one (those range from 6%-12% off). We like to eat out, and I buy restaurant gift cards at 6%-20% off regularly. I normally have 2-3 $25 ones in my purse at any given time. I also take advantage of the deals around Christmas that the restaurants themselves do. One of our favs is Texas Roadhouse - we bought $200 in gift cards and they gave us $70 in coupons for dollars off our purchase ($15 off total purchase, etc). I see it as an easy way to save money.

I'm not saying it won't happen, but I have spent more than $4,000 with Cardpool and every gift card has worked correctly, so they have a good track record with me.

I have spent a ton with them, though I don't know how much but I've been using them quite a few years and my first issue came this year.  They sent me a $5 credit, refunded the money and it was done in less than 5 minutes.  I think for the amount I have save, this one issue in more than five years, with a wonderful response is fine.

[onlykelsey]

I feel like I've been living under a rock.  Now I'm playing with a large nordstrom gift card which will then also be my clothing budget for X months.  Fascinating. Thanks, MMM!

[MrSal]

Yes definitely!

I bought during December about 4000 dollars worth of Lowes gift cards. They were selling them at Sunoco gas stations for 20% discount!

I knew we were going to use it this summer to build our deck and also for insulation and other projects!

I bought the most I could, and I actually I reached some bonus points on CC as well. Even if I dont use it all i can always sell it easily at profit still to builders or something.

[Villanelle]

Definitely.  I d this if I am planning a large purchase, for places I shop regularly, and for gifts.  I mostly use Cardcash.com.  A while back, someone posted on MMM a website that tracks all of the card resellers.  You entered the store you wanted, and it told you which of the sites had the biggest discount.  Sadly, I didn't bookmark it and I've been unable to locate it. 

[MrSal]

Definitely.  I d this if I am planning a large purchase, for places I shop regularly, and for gifts.  I mostly use Cardcash.com.  A while back, someone posted on MMM a website that tracks all of the card resellers.  You entered the store you wanted, and it told you which of the sites had the biggest discount.  Sadly, I didn't bookmark it and I've been unable to locate it.

giftcardgranny.com

[Villanelle]

Definitely.  I d this if I am planning a large purchase, for places I shop regularly, and for gifts.  I mostly use Cardcash.com.  A while back, someone posted on MMM a website that tracks all of the card resellers.  You entered the store you wanted, and it told you which of the sites had the biggest discount.  Sadly, I didn't bookmark it and I've been unable to locate it.

giftcardgranny.com

THANK YOU!!!!!!

[Rosy]

Yes definitely!

I bought during December about 4000 dollars worth of Lowes gift cards. They were selling them at Sunoco gas stations for 20% discount!

I knew we were going to use it this summer to build our deck and also for insulation and other projects!

I bought the most I could, and I actually I reached some bonus points on CC as well. Even if I dont use it all i can always sell it easily at profit still to builders or something.

Oh wow -I've been missing out - 20% discount on a Lowes card and to think I also get 10% military discount, that would be 30% savings on a big project.
I just looked and giftcardgranny has them listed at 15.4% off - oh my, thanks guys for all the great info:)

@supermatthew - that is a neat trick for reducing your grocery bill and could work as a built in grocery budget too. No money, only giftcard grocery shopping.

...and dang, if they didn't have an Applebees gc for 25% off - We could get a $6 burger on Mondays, use giftcard at 25% off. Sweet deal.

[johnny847]

Definitely.  I d this if I am planning a large purchase, for places I shop regularly, and for gifts.  I mostly use Cardcash.com.  A while back, someone posted on MMM a website that tracks all of the card resellers.  You entered the store you wanted, and it told you which of the sites had the biggest discount.  Sadly, I didn't bookmark it and I've been unable to locate it.

giftcardgranny.com

THANK YOU!!!!!!

I used to use giftcardgranny.com. But now I much prefer Gift Card Wiki. The interface is a lot cleaner. It also gives you a history over the past three months, which is great.


As for the original question, I stock up on gift cards whenever they're at a steep enough discount. Looks like supermathew has a nice spreadsheet with all the math involved.


However I highly recommend against stocking up on used gift cards from resellers that you won't spend within their guarantee window (typically 30-45 days). Within this window if your gift card doesn't retain it's value, they will refund you.
There's nothing actually preventing someone who sells a used gift card to them from writing down the gift card number (and any associated PIN). This is mitigated via two factors
1) Some resellers will take down your credit card number when you sell them used gc's. If a gc you sold to them is reported to have mysteriously lost value, they charge your credit card.
2) If enough gc's you've sold to them go bad, they won't buy them from you anymore.


So stocking up on gc's from 5% quarterly bonuses, special sales directly from the store (ie, Target once a year), or Amex offers (ie, spend $50 get $10 back at say Lowe's - buy other merchant gc's there)? Stock away (to the extent that your savings are greater than what you could earn investing that money instead).
But used gc's? Only stock up to the extent you can spend them within their guarantee window (30-45 days).