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Gift Card Reselling Protecting Yourself
It’s been almost a week since we first covered the news that something was wrong over at The Plastic Merchant. Last Wednesday we published a warning after hearing from a few readers that payments had bounced. Since then over 200 comments have come in to our original post to discuss what has happened.
Before I go any further, let me recap what we know and don’t about this situation:
- The Plastic Merchant is a company that buys gift cards from “buyers” and then sells them to a variety of sources.
- Many people in the miles/points community would take advantage of gift card deals to earn points and then sell the cards to The Plastic Merchant.
- Twice in the past, including earlier this year, The Plastic Merchant had payment issues where checks bounced. Both of these times things were resolved.
- Prior to us publishing our post last Wednesday I reached out to The Plastic Merchant’s owner asking for a statement about what we had heard. To this day I have not heard anything back.
- Checks began bouncing this third time a little over a week ago. Following this, the company and it’s owner were unresponsive. A few hours after we posted last Wednesday, a representative from the company reached out to all sellers asking for time and patience since the owner was in the hospital. Nothing has been heard from the company since.
- People are claiming to be out many thousands of dollars. I have heard of at least one person who supposedly had a $20K check bounce and several others with checks in the $5K-$10K range. You can learn more about what is going on in the comments on our original post and in our Facebook group. I have not personally verified each claim, but had a similar experience myself.
My The Plastic Merchant Experience
Nowadays I sell 98% of the cards I purchase myself. This means I rarely sell cards to 3rd parties such as The Plastic Merchant. With that said, coincidentally I decided to sell a small amount of cards to the company in mid-May. I decided to do this to keep my account active and because I had enough cards of a particular brand that I felt it alright to sell a few over there.
As you would expect, I never received payment for those cards. No check was issued nor payment sent. Because of this, I emailed The Plastic Merchant with my intention to cancel the sale and I proceeded to use these $50 cards to purchase $100 cards for the same merchant in-store. Most merchants won’t allow this, but luckily this one did. I now have new cards and numbers and am not out any money. The Plastic Merchant is not out any money from me either, since they never initiated a payment for these cards.
Gift Card Reselling Going Forward
The miles/points hobby can be a tricky one at times. Our desire to earn a lot of travel rewards can mean we are spending a lot of money and not everyone is prepared to do that. For example, buying large amounts of gift cards (merchant or Visa/MC) requires a tremendous amount of float. One thing goes wrong and it can be disastrous.
As I talk about in all of my reselling articles, this type of stuff is a business. Buying and selling thousands of dollars of any type of merchandise requires effort and focus. You need to make sure you are protecting yourself from downside, while also keeping up on accounting, fraud and making sure you are properly capitalized. You know, the boring stuff!
Where to Sell Cards
There are other players in the gift card market that will still buy cards and there are marketplaces where you can sell cards directly. I don’t want to endorse any so I won’t mention them here, but they are easy enough to find.
Here are some considerations I think you should make when deciding whether to do this and who to sell to:
- If selling on a marketplace, do you qualify for bulk seller status in order to get better commission rates? Reach out. Ask them.
- If selling to a private buyer, are you properly protecting yourself in case of them becoming insolvent? What type of agreement do you have? How fast do they pay?
- Can you sell to large corporate buyers and get preferred rates?
- Can you handle the downside risk of this type of business? Can you handle floating money for long periods of time in case something goes wrong?
- Is the amount of effort and time you are putting into the gift card reselling business worth the profit and rewards you are getting out of it?
My Gift Card Reselling Business
As I mentioned before, I sell about 99% of the cards I buy directly. I also buy cards from a few other people and sell those too. The only people I purchase from are people I know personally. That is my protection. In return I offer them favorable payment terms (I pay quickly) which offsets much of the risk for them. This isn’t scalable.
Any one of the larger companies or resellers is going to have a delay between when you submit your cards and when you get payment. There are a number of reasons for this, but basically it requires a ton of money to run a business like this. Taking advantage of certain deals often requires some time to cashout the cards you buy.
This turned out to be the key problem with The Plastic Merchant. By the time people found out the checks were bouncing it was too late. I’m not quite sure how you can eliminate your risk, but finding smaller private buyers who pay quickly is certainly a dream scenario if you can pull that off.
What has happened with The Plastic Merchant should be an eye opener for us all. As we pursue miles/points we often get ourselves involved with things where we don’t fully understand the risks of what we are doing. This is a business and all businesses have risks. The key to going forward is mitigating those risks in order to protect yourself.
I wish I had more news to share about The Plastic Merchant and what will happen, but there is just no news as of now. I’m still hoping we will hear more from the company, but even if we do, I won’t be selling them cards anymore.
Miles to Memories has partnered with CardRatings for our coverage of credit card products. Miles to Memories and CardRatings may receive a commission from card issuers.