Gift Card Reselling Following The Plastic Merchant Debacle: Things to Know & How to Protect Yourself

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Gift Card Reselling Protecting Yourself

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 Protecting Yourself

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?

Gift Card Reselling Protecting Yourself

 

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.

Conclusion

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. 


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31 COMMENTS

  1. Unfortunately, I don’t qualify for Raise’s bulk platform as I don’t sell $2500 a month. Since it’s a hobby, TPM was great for me since it allowed me to sell things that had break even rates give or take. Fortunately, I’m not out anything w the latest debacle with them, but won’t be doing anything with them going forward.

    Just wish there was an alternative as I don’t know/not cool enough to know where the cool kids are.

      • So very not helpful……. borderline bit too “smart.” Reminds me of the “good ole’ days” in this “hacker space,” when “veteran” pioneers in the miles & points “community” would blithely subscribe to Drew Macomber’s mantra and common practice to “not kill a deal.” Yet such may now be the state of things…. Shawn’s otherwise wise and helpful review avoids even mentioning other outlets, lest he be perceived as endorsing any of them…. So now those of us not on the inside, not in somebody’s inner circle, will be left wondering….

        ps, about the substance of Shawn’s post, the advise of rely on “private buyers” who pay quickly and reliably (and that you know and trust) seems something not far from believing in unicorns. The death of our hobby is at hand.

        • — either that, or while Rome was burning — while the house of cards at TPM was about to blow-up — the “hobby” totally changed…. That Shawn is now selling 98% of his cards via private channels — via outlets we mere mortals are apparently not to know about — wow…. think about that Shawn.

          Congratulations to you that you’ve found such a safe place to sell cards safely and thrive, to continue forward in confidence…… But going forward, is this august web site (to which I’m grateful for the TPM alert) now confined primarily to those in the know…. and the rest of us are left guessing at the secrets some inner circle knows….. but ya’all can’t share or tell. (lest you “kill the deal”) 🙂

          • It’s funny. I’m not a guru who sold you a program telling you how you will get rich selling gift cards. I don’t know what you expect from me. I’m just someone who has both built a fairly large blog and a decent sized Reselling business. A person who decided to share his thoughts so it could help some people.

            If you read the post then you will see I shared a lot of knowledge. I’m not in any inside clubs. The knowledge I have built was stuff learned the hard way. In fact, I suck at networking so it took me longer than most to get this far.

            I know you read the site and I appreciate your insight but attacking me for sharing information but not spoonfeeding everyone does not make me feel bad at all. I have worked for every single bit of the knowledge I shared and the knowledge I didn’t. And I didn’t charge you for any of it.

    • I still need to call. I was waiting to see if anymore cards went bad. With that said, I have seen a couple of data points of people getting new cards issued when calling corporate.

    • I called tonight and was stonewalled by front line and supervisors. Gonna give them one more try in the morning and see where it goes.

  2. Technically, processed cards could have been sold by TPM to 3rd party already.

    So it is possible you have exposed yourself to some legal nasty stuff.

    • As has been said in the other forum, TPM’s legal responsibility do not become inheritable to both the sellers and buyers. While they may seem interconnected, they are in fact, two separate agreements. Those that purchased from TPM have to seek remedy through TPM to recoup. TPM, in turn, must attempt to remedy through those he bought from. There is not a pass-through transference of liability.

  3. It’s a shame what happened to TPM. I met Mike several times and he always seemed like such a good guy. He could be in the hospital based on the stress of his business falling apart and him owing people so much money. Or it could be completely unrelated. My Dad was a bankruptcy attorney and many of his clients’ businesses went under due to their medical conditions. And stress from financial pressures certain affected many of their health and marriages. I hope he recovers and is able to make everyone whole again.

  4. Appreciate your website, Shawn. Understand that there’s a large silent majority of readers who appreciate your contributions in the space, even if it’s always the idiots who are the most likely to chime in.

  5. Interesting that some of Shawn’s readers want a coloring book and set of crayons on how to sell cards. While they’re at it, might as well email good ole Bill Gates and see if he’s handing out the open source code to a Windows. Everything should be provided to me a on silver platter because I’m a “subscriber,” right? What a bunch of entitled clowns.

  6. How does one find buyers for these cards, especially on a large scale? I was always curious about that with TPM. Who was buying all those Amazon cards at very near full value?!

    • I’m still trying to figure out why people buy gift cards on eBay for MORE than the face value… ie, $100 whatever card for $105. Why not just visit the site and buy direct?

    • Third time a round of bounced checks happens, payout from first week of June not paid and we’ve had nothing but radio silence. It’s your money but if you ask me I think you’re being WAY too optimistic and forgiving.

      I don’t share your glass half full perspective and liquidated $1k worth of home depot gift cards that weren’t processed yet.

  7. My check for $1275 bounced. I did a check and the 500 Adidas and 500 Home Depot were drained right away. I was able to load the iTunes even, though I rarely purchase anything. Haven’t checked the Petco yet. I don’t have pets so…. If TPM wants to come back at me, good luck. I have a lawyer buddy who will make it not worth his time. I have no moral dilemma trying to pull back cards they actually didn’t pay for. I will not go after any of the cards for which I actually did receive payment, approx $40K over the past year or so. Even though I am pissed as hell, fair is fair. All in all, Im probably out around $900. I have zero confidence in getting any of this back. It so, great, but am certainly done with TPM.

    On a separate note Shawn, thanks for all you and the team do. Those people who criticize you because you don’t completely outline step by step instructions are just plain lazy and absurd. MTM is one of my daily reads along with DOC and MPD.

  8. can someone tell me the meaning of TPM,
    i want to sell my cards, i have lots of e gift cards mostly restaurants but, i need to know what is this TPM.
    thank you

  9. Called the plastic merchant. They are now out of business.

    A search for them will give you all the information you will need.

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