How can gift cards be sold for more than their value?
Here is a common question, which appears in many formats. One version works like this: I see Amazon gift cards on eBay right now selling for more than the value of the card. Why is this? I don’t get it. If I go to Amazon’s website, I pay the face value of the card to buy a gift card. If I go to Wal-Mart, I pay $10 for a $10 card, so I don’t understand why people pay a premium on eBay and buy the same card for more than it’s worth.
This has me stumped. I know of people who give their gift cards to underprivileged children, and I know of people who buy their gift cards cheaply on the thrift market. (Plastic Jungle, ABC Gift Cards, and CardCash websites, among others, come to mind.) But people paying more than the value of the gift card? Hey, we can really make it big! We can sell our $20 gift cards for $25, then buy a $25 one and sell it for $30, and before you know it, we’ll be looking at a nice beachfront property. Something tells me this isn’t real…
My theory:
Let me suggest my theory. It’s not fanciful or dabbles in conspiracies, but it’s all I could think of; Perhaps these bidders are using automatic software that increases the bid. It could be that they are in cahoots with the seller, or that they ARE the seller, and their goal is to maximize the offer. However, since automated software cannot tell the difference between some item of indeterminate value and a gift card of obviously limited value, this ridiculous scenario ensues.
What happens when these guys win?
The question in my mind is what happens when they win the auction, and they win hands down, because no one in their right mind will outbid them, do they have to pay what they bid? Is this perhaps a business model; Buy gift cards in low demand and resell them on eBay for full face value or more?
Research:
Rolling up my sleeves, I tried to get to the bottom of this. I’ve found that it’s common for gift cards to sell for above their value. And that the reasons are both legitimate and illegitimate. A good reason can be someone too lazy to go to a store. They will overpay to save on gas costs and hassle. Other people want to withdraw money from an account that does not allow them easy access. A PayPal account that doesn’t have a bank account attached to it is a good example of someone who might use gift cards as a way to withdraw money from their account.
Less legitimate is that drug dealers and terrorist groups looking for ways to transfer money incognito will use gift cards (worth ten thousand dollars at a time) as a seemingly innocuous means of doing so. They will buy these cards as a monetary vehicle. At the border, officials may ask you how much money you have, but will they search your wallet for gift cards? And they will pay a premium if necessary, in order to get the transfer.
What is especially disturbing are the schemes of the scammers. Some people will offer $120 on a $100 gift card because they never intend to pay. They will insert a valid credit card and claim that they have never received it or that it has already been used up. eBay will normally refund the buyer. Now the buyer has the goods, and there is little he can do to prove that the card he sent was not used.
To do:
What can you do about it? At its core, the eBay experience is built on trust. If a buyer or seller abuses his position, he will lose the ability to trade on that platform. So you need to examine whether the person would care about that. Look at the number of comments the buyer has and if they are all positive. If they’ve done business for a while on eBay, they’re less likely to jeopardize their ratings for a few dollars. In addition, their good track record also guarantees the trust that can be had in them. However, it is suspicious that someone has overbid. Also, try to get eBay insurance to cover a chargeback and implement as many security mechanisms as they will allow.