Tuesday, December 8, 2009

Gift Cards Are A Scam

Gift cards are an easy gift, and most people love to give and/or receive them.  They provide the giver with the illusion of sincerity and the recipient with the promise of a future shopping spree.  Win-win, right?  Wrong.  Do not buy gift cards.  They are a scam.  The only scenario for which it would be fortuitous to purchase a gift card would be if you were on your way to a store/restaurant and were already planning on spending a set amount of money, and you can purchase that set amount of money in gift cards from a store that will give you cash back or gas money for buying gift cards from them.  Merchants make money off of gift cards because they get cash in hand for the exchange of future goods or services.  They can reinvest your money and earn interest on it while you have nothing, until you use the gift card.  When you use the gift card, you are locked into spending it at a certain store and you may be forced to purchase more than you want, just to use up the balance of the gift card.  This forces you to spend money in order to use something that was likely received as a gift.  The other option is to spend as close to the gift card amount without going over, which will inevitably leave a usually small amount of money on the card, which will eventually expire.  This is exactly what the merchant wants, because if enough people do this, it will add up to a significant amount of money earned by the merchant for doing nothing at all.

That being said, a smart way to earn money would be to sell gift cards.  If you own a bakery, a hair salon, a drive-in movie theater, etc., supply gift cards for your customers to purchase.  You can also provide incentive for customers to purchase more gift cards than they would ever need by offering a free $5 card for buying, say, $50 or more in gift cards from you.  If you do not own a business, you could attempt to coordinate with local business to sell gift cards for them.  Arrange to receive a commission for each card sold and suddenly you're making money with little investment on your part.

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