Selling unused gift cards

No. 1 rule in the gift-card resale business: The more popular the retailer, the higher the price.

We want gift cards and like to give them, but for some reason we don't always use them and wind up wasting billions of dollars.

A recent poll by Consumer Reports, for instance, found that one-quarter of people who received a card as a holiday gift last year still haven't used it, and more than half of those had two or more unredeemed cards.

We have lots of excuses. We forgot about the card or lost it. The store didn't have any merchandise we wanted. Or the retailer isn't nearby, or we don't like the store.

This has spawned an online secondary market where gift card exchange sites, such as PlasticJungle.com, Cardpool.com, MonsterGiftCard.com and GiftCardRescue.com, help consumers buy and sell unwanted retail gift cards at a discount. Sellers can get around 70 percent to 90 percent of the value of their cards. The more popular the retailer, the higher the price.

"It at least gives consumers the option to get something for an unused gift card," said Tod Marks, senior editor at Consumer Reports. "It's like life support for unwanted gift cards."

Of course, one way to avoid unwanted or forgotten cards is by giving cash or checks instead. It's unlikely that someone will fail to spend money that's in their wallet or deposited in the bank. Another benefit: Shoppers tend to spend more at a store than the amount on the gift card. Not so with cash.

But card experts and consumer advocates cringe at my suggestion of cash, saying bills are "gauche." At least a gift card to a favorite retailer, they say, makes it seem as if you gave some thought to what the recipient would want.

And besides, some say, people want gift cards. They are the No. 1 requested gift this season and are at the top of most shopping lists, according to the National Retail Federation.

Record sales

Gift card sales are expected to reach a record $100 billion this year, up nearly 10 percent from the year before, according to TowerGroup, a research and advisory firm. About $2 billion of that, though, will be lost through fees and expired, stolen or misplaced cards.

The losses were much worse before federal protections kicked in last year that, among other things, prevent cards from expiring within the first five years.

Still, $2 billion is a lot of money to leave on the table. And if we don't use it, somebody else will.

Some retailers recognize unredeemed cards as income after a long period of inactivity. Starbucks Corp., for example, reported $46.9 million in income from unredeemed cards for the year ended in October.

And more than a dozen states now recover funds on unredeemed cards, similar to other unclaimed property, said Brian Riley, senior research director at TowerGroup.

So if you are going to give a gift card, make sure it's from a retailer that the recipient patronizes. Or if you're not sure, consider a general-purpose gift card that can be used at any store, although you'll pay a fee to buy the card. American Express, for instance, offers such cards for a $3.95 fee.

And if you're stuck after the holidays with cards you don't want, here's some advice for getting rid of them:

Don't spend, invest: The most innovative use of unwanted gift cards this season goes to GoalMine, which caters to small investors by helping them set goals and begin investing for as little as $25.

Between Dec. 19 and the end of January, GoalMine is accepting unwanted gift cards with values of $25 and up that will be sold at PlasticJungle.com, a card exchange site. Consumers decide whether to deposit the proceeds in an FDIC-insured savings account or in a stock or bond mutual fund.

As a further incentive, GoalMine promises to redeem the first card for 150 percent of its value. The card can't be worth more than $50.

Gift card exchanges: These middleman websites for consumers wanting to buy, sell or swap cards have been growing. PlasticJungle, one of the major players, bought and sold cards worth about $18 million last year, three times the amount of the year before, said Chief Executive Bruce Bower. "We are having similar growth right now," he added.

Sites deal in gift cards from hundreds of national retailers, so you likely won't be able to sell a gift card from a local shop. Cards usually must have a value of $20 or $25 still on them.

Sellers send their cards to the exchange, which verifies the value. They can get as much as 92 percent of the value of the card, but that's for the hottest retailers.

Buyers can pick up cards at a discount of up to 35 percent, although the saving is much less on popular cards.

Before buying or selling, read the terms, which also can vary among the sites. And buyers should make sure the site guarantees the cards it sells.

Also buyers should beware of cards with a value that's an odd number, say, $63.45, which could signal that the card was given to a customer as a refund on a purchase, said TowerGroup's Riley. Refund cards, he said, don't have the same legal protections as gift cards.