The Gift Card Exit Strategy
Like many of you I purchase gift cards for a variety of legitimate uses including to pay my bills. When stores like Officemax/Office Depot have wonderful deals like we are seeing this week, it is tempting to stock up for the long haul. Go to store A, buy a bunch of gift cards, go to store B and buy more. Rinse, repeat. Before you know it you have thousands and thousands of dollars in gift cards.
Here is a photo I took from a similar Officemax promotion a couple of years ago. This isn’t even close to all of them either. I just couldn’t stop!
During this particular deal, all of the stores had run out of $200 cards, but I still opted for the $100s despite the lesser math and overall greater hassle. It took me awhile but I did eventually go through these cards because I had a plan for them and knew how to use them when I bought them. In other words, I had an exit strategy.
The Emergency Strategy
In fact, for those cards and most normal cards an exit strategy could be simple. Use a payment service such as PayPal or even a swipe service like Square (not recommended) to drain the cards and get the money back. You will of course pay about 3% in fees, but in an emergency that would be acceptable, especially considering the rebate and rewards. It is a good emergency backup plan.
Which brings me to this latest deal. In addition to regular Visa gift cards similar to the ones pictured above, Office Depot has new “Everywhere” Visa cards. These cards are titled things like “Dining Everywhere”, “Fuel Everywhere” and “Style Everywhere” among others. On the positive side these cards have a lower $4.95 fee compared to the $6.95 fee of the normal cards, however the issue is that they are restricted to select merchants. That emergency plan I mentioned above probably won’t work! (Although it could in the Square scenario if you code it right.)
Some Troubling Observations & A Story
This week I have noticed some chatter from people who purchased large amounts of these cards without knowing how or where they could liquidate them. (Especially the Fuel & Style cards.) This is a really really bad idea and reminds me of something. Let me take you back to 2013 and to something called the Home Improvement gift card.
Back in 2013 Office Depot clamped down on accepting credit cards for most reloadable products like Vanilla Reloads. They did however still accept credit cards (some that earn 5X) for the Home Improvement gift card. Better yet, this card had no fee, but it was only supposed to be used at home improvement stores. Then one day someone discovered it was PIN-enabled and could be loaded to Bluebird. It was a bonanza! People bought tons. And then the deal died, the PINs were shutoff and people were left floating a ton of money.
Buy, Liquidate & Don’t Float Too Much
So what is my point? Buy and liquidate. This past Sunday when the Office Depot deal went live, I spotted the Dining Everywhere cards for the first time in the wild. Instead of buying them exclusively, I bought some of the more expensive but more reliable normal cards. Then, I stopped along the way and confirmed how I could liquidate the Dining Cards and finally began buying more of them. The key though is that method could change. I thus liquidated quickly.
Of course this could all end the same way as the Home Improvement Gift Card which brings me to my final point. No matter how good a deal is and no matter how excited you are, never float more money than you are comfortable with. In other words, if I had had to float the Dining Everywhere cards for months if something crazy were to happen, then I could have. I would not have been happy, but it wouldn’t have caused serious financial issues.
I sort of think you should treat your MS like a business. Get excited about good opportunities but don’t let them cloud your judgement. You are in it to maximize your returns and to minimize your investments. A simple mistake can be costly and for that reason you should always have an exit strategy and if in doubt remember that slow and steady doesn’t make you a loser!