Gift Card Reselling & Arbitrage: A Painful & Expensive Lesson Resurfacing from the Past!

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gift card reselling chargeback

Gift Card Reselling Chargeback – A Painful & Expensive Lesson

Earlier this year in an effort to diversify my manufactured spending, I started reselling gift cards. At first I started with some Amex Offers and eBay deals and then graduated to more advanced methods. In the end I determined that it probably wasn’t something I wanted to dedicate a lot of time to, however I’m glad I now have the skills to jump on great deals.

One of the crazy things I did twice when I was really getting into reselling was buying from one exchange and selling to another at a higher price. THIS IS A TERRIBLE IDEA! In fact, after I did it twice in two days I decided never to do it again, because there is simply too much that can go wrong, the profit doesn’t justify the risk and I don’t want to ruin my relationship with gift card resellers.

The Red Lobster Problem

gift card reselling chargeback

One of the two purchases I made was 10 X $100 Red Lobster gift cards. I then turned around and sold them to another company. When those cards arrived at the company I sold them to, two of them were invalid. This means they were probably purchased with a stolen credit card. Yikes! Thankfully I had purchase protection and I was refunded for those two cards. The other 8 seemed to be fine.

That was back in June and then yesterday I received this notification from the company I sold the cards to:

Hello Shawn,

A Takeback has been issued on one of the gift cards we acquired from you, after the merchant (Red Lobster) has reported it as invalidated. The affected card is listed below.

Takeback Amount: $91

One of the cards they bought from me was eventually invalidated and they charged me back the $91 they paid me for it. Ouch! My first thought was to contact the company from which I purchased the card. Unfortunately they only have a 90 day buyer’s guarantee.

The company I sold the cards to has the same 90 days buyer’s guarantee (for whoever they sold it to), so hopefully that period will be over soon and I will be in the clear. I really hope all of the other 7 cards are valid and that no one else gets ripped off.

Lessons Learned

gift card reselling chargeback

While I actually learned this lesson long ago, this just shows you how a bad decision can bite you in the behind! Since I made a somewhat decent profit on the sale of these cards, this chargeback brings me to about breakeven on the transaction. If any more cards go, then I am out some serious money!

Here are a few key takeaways that everyone should follow when it comes to gift cards & exchanges:

  • Never buy from one exchange to sell to another.
  • If a card is priced significantly lower that the competition on a site like Raise, it is probably fraud since they want to unload the cards quickly.
  • If you are buying from an exchange, then use the cards immediately. I only buy gift cards from exchanges when I have immediate plans to use the entire balance. Your purchase is only protected for a limited time.

Conclusion

Part of life is living and learning and understanding that some “deals” just aren’t worth the risk or effort. Thankfully only one card has gone bad (actually 3 of the 10 have) and I hope/pray that nothing else comes from this. Either way, it is a lesson learned and a mistake I won’t make again. Hopefully my pain can help some of you in the future! Happy gift card¬†hunting!


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18 COMMENTS

  1. I had a similar situation with about 10k of Macy’s gift cards. It was my understanding we were buying them from a gambler in Las Vegas who had been awarded them at Station casinos for gambling so much. We immediately took the cards down to Macys and transfered them onto new gift cards. That would be my recommendation once you bought from the first gift card reseller go down the Red Lobster and transfer them onto different denomination cards.

  2. Completely agree with you. Just had this happen to me recently – bought some cards from one exchange and sold to another. After 2 months, the exchange came back and said that the cards just became zero balance (almost $2000), and they took the cost + $10 per card (which made the transaction as a 5% loss, even after recovering costs from the exchange from whom I bought the cards). Also, I lost preferred status on the exchange because of the high fraud rates, which was the worst part. So yes, painful and expensive lesson! Never again…

  3. I had the same problems and learned the same lesson – never buy from one exchange and sell to another. I ended up with “store credit” cards from New York and Company and I’m having a heck of a time trying to get rid of them anywhere…

  4. Don’t do it. I got banned from CardCash, SaveYa, and Gift Card Zen literally on the same day because a card I sold them went bad and now I can’t even sell them cards from eBay deals or Amex offers and am stuck with thousands of dollars of cards.

  5. couldn’t agree more. things were going well for me doing this a few times, then I ramped up big on a recent sale and lo and behold, the cards came back as drained. It’s funny, but when I started purchasing them during the recent cardcash sale, I bough so many that a bulk selling agent from cardcash called me and in a really odd, frantic pitch, tried to get me to buy directly from him for an extra 5% off. He was making a really hard sell, so it made me a bit wary and I declined. Glad I did. Kinda shocked that they are selling so many dud cards and then make it painful to have them finally issue a refund.

  6. I am one of those gamblers who has received Macy’s gift cards as an incentive to return. I don’t sell them. But one Saturday night I was verifying the balances in preparation for a shopping trip the next day. Some now had a “zero” balance even though they initially had been loaded with the correct amount. And I had never used them. Macy’s eventually replaced these cards. But with all the computer “shenanigans” out there I suggest all of you take a serious second look at this aspect of your favorite hobby. One of these days you won’t be as lucky as I was and will lose far more than the small profits per card for which you work so diligently.

  7. Yup, never buy from one exchange to sell in another! You also don’t want to mess up your reputation as a seller with the exchange sites. I sell a lot of gift cards on Raise and know that my cards are guaranteed to work. However, every so often, a buyer will claim that my card was bad. Thank goodness for keeping good records and all the receipts. Raise protects buyers but they also protect sellers too. See this post (http://wp.me/p6O8NO-dR) for some tips on selling on Raise to maximize ROI.

  8. I buy gift cards to actually use and the last two from CardCash were no good. They have refunded the first and working on the second. I told them to try to send me some from legit sellers next time!

  9. I learned my lesson with buying from one exchange an selling to another. It’s just not worth it and it’s something that should be rule 101 of gift card reselling. I won’t even entertain the idea of buying second hand gift cards, no matter how steep the discount is.

    One word of caution about SaveYa. They’ve pulled back funds from me without notice, AND beyond their 90 day return warranty to the buyer. Worse yet, they don’t even offer a warranty on ecards, which was what this card was that I sold them. So in essence what they did is honor a warranty to a buyer more than 3 months after the sale date, on a card that has no warranty, and without so much as notifying the seller of the issue.

    Needless to say I was not very happy with them nor do I believe their shuffling of deck chairs every week while trying to maintain any semblance of organization or direction as a company is getting them anywhere. Also worth noting that I know I’m not alone in having an overall bad exerience with SaveYa and pulling back cards, some of which were not fraudulent, which leads me to believe they’re taking the eBay approach on the buyer vs seller issue. Even little things such as their system not detecting a gift card balance and cancelling part of my order becomes a pain when you’re not wanting – or willing – to factor in these annoyances when trying to do a quick flip on a small margin to begin with.

    Raise is in my opinion (and others) the worst at facilitating fraudulent gift cards. Since they’re a marketplace like eBay, they don’t have possession of the cards. I’ve been told by insiders that many of the cards you see on Raise are from pawn shops and similar situations where even those with good intent screwed up along the way and someone down the road will pay. Be it the buyer or seller.

    I’ve also read a comment somewhere that the major players were looking to create some shared database or tracker on second hand gift cards that would notify each business of a card being sold from one exchange to the other. I don’t doubt it would happen and I could definitely see a collaboration formed as it’s in their best interests to weed this practice out completely.

    That leads me to one other thing that I do as a buyer for personal use. You can recycle many brands of gift cards. Obviously not all, but when at all possible this is what I do. I have a select number of merchants we buy our everyday stuff from and I therefore recycle cards and keep funds on hand for the random sales that pop up when we need said items.

    • My experience with buying and selling on Raise hasn’t been that bad. Yes, I’ve bought a few cards that were drained but they do follow the 90 days money back guarantee, so I was able to get my money back. I’ve also sold a number of gift cards. I had only one case where the buyer claimed I sold them a bad card but in reality, they used it up and reported a bad card. I acquire all my cards from merchants or stores and have activation receipts so I’m positive all my cards have funds in them when I list on Raise. I disputed that “bad” card with Raise and eventually got my money a few weeks later. In this case, I’m not sure if Raise is taking the loss since they probably already refunded the buyer.

      In this gift card business, there’s bound to be a lot of fraud, so buyers and sellers have to know the basic 101. Don’t buy from one exchange to sell to another. Use the funds immediately and don’t keep the card around if you’re not going to use them. Even better if you can transfer funds from one card to a new or “clean” card (e.g., Target).

      • Just for clarification, I’m referring to Raise as a marketplace as a whole and not as an option for those of us who sell to them. By “us” I mean the honest people here, not pawn shops and the like.

        Raise, besides GCZ, is the only exchange I’m not a bulk seller with. I’m just not interested in keeping up with the status quo and having a rep on my back asking how I’m doing with sales. As a buyer I have gone through the refund process with Raise 4 or 5 times. All but one were done within 1-2 weeks. However after several failed emails and a full month passed without so much as an approval on the refund I had to pull the “i’m going to take action” card to get anything done. Lo and behold less than 12 hours after the email I had a refund being processed. It really shouldn’t come down to this. Note that I had sent half a dozen emails that were ignored previously so they can’t tell me they didn’t see my emails.

        The target recycling as you pointed out is another good one I forgot to mention. But yeah in general there’s a steep and possibly expensive learning curve for those who aren’t privy to the pitfalls of buying and selling through the exchanges. For myself it’s been a great minimum spend tool and a much preferred method of liquidating AGC/VGC than running around and hoping a cashier plays nice and allows the transactions.

  10. Jeez, scary stuff and good points all around. I had just recently started doing the arbitrage, and am now plenty worried. What is the Target recycling thing you guys are referring to? Thanks for the heads up!

    • Target (and even Walmart) allows to buy another gift card with another Card, which becomes clean. Although its not a foolproof, as if the cards you use to buy another one was actually fraudulent and then if retailers pursues it, you could have a big bite as they may invalidate your “Clean” card.

    • Yeah, this is actually a good article as a reminder for anyone who is unsuspecting of the perils of gift card reselling. Especially for buying second hand with the intention of reselling.

      As far as the Target thing is concerned, what you can do is use the Target app on your phone and go to the gift card section and when you click on an existing gift card (you need to have one there) you can combine others into it. In essence, you’re consolidating other cards that will bump up the balance of the existing card in your target account. When you do this you’re protecting from any losses as the balance of the card you obtained (from let’s say cardpool) is now empty and used by you and no one else.

  11. Target (and even Walmart) allows to buy another gift card with another Card, which becomes clean. Although its not a foolproof, as if the cards you use to buy another one was actually fraudulent and then if retailers pursues it, you could have a big bite as they may invalidate your “Clean” card.

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