In The News

Discounted Gift Cards: Are They Worth It?

By Kelli B. Grant | December 2009

SHOPPERS ON THE HUNT for a holiday gift that looks more valuable than its price tag have a surprising option this year: gift cards.

Faced with predictions for flat holiday sales and plunging gift card sales, retailers are trying to bolster numbers and capture future sales by slashing prices on gift cards. For example, Borders (BGP: 1.14*, -0.02, -1.72%) recently offered a free $10 gift card with an online purchase of two $25 gift cards. Restaurant operator B.R. Guest, with locations in New York, Las Vegas, and St. Petersburg, Fla., is currently offering a 20% discount on its dining gift cards.

It's a smart business strategy for the stores. Consumers inevitably spend more than the card's face value, adding to the retailer's profit despite the initial discount, says Eugene Fram, a professor emeritus of marketing at the E. Philip Saunders College of Business at Rochester Institute of Technology in Rochester, N.Y.

But grabbing a gift card for less than face value can also be a smart way for shoppers to snag an extra discount on their holiday shopping, or to give a gift that's slightly more generous than their budget allows.

Here are four ways to get gift cards without paying full price:

1. Look for Retail Promotions
Take advantage of holiday promotions offering bonus cards or flat discounts on gift cards. One caveat: Some bonus cards can only be used after the holidays. Here are some offers currently on the table:

* B.R. Guest: Save 20% on gift cards purchased online through Dec. 15. (The company's restaurants include Dos Caminos, Fiamma Trattoria in Las Vegas, and Blue Fin.)

* CVS: Get a free $5 e-gift card for every $25 in e-gift cards purchased online. (No end date specified.)

* Eastbay: Save 20% on gift card purchases when you use code "IPEB9HC2" at checkout through Dec. 19.

* Marriott: Receive a 10% bonus on your gift card when you use code "MMF" at checkout. Offer good through Dec. 31.

* OSI Restaurant Partners: Get a $20 bonus card for every $100 in gift cards purchased through Dec. 31. Bonus cards are redeemable Jan. 1 through Feb. 10, 2010. (The company's restaurants include Outback Steakhouse, Carrabba's Italian Grill and Bonefish Grill.)

2. Cash in Credit Card Rewards
Issuers offer better rates for your miles or points when you redeem them for store gift cards in lieu of cash. Citibank (C: 4.10*, -0.01, -0.24%), for example, charges 16,000 points for $100 cash. That same point total would be enough to get you $150 in Macy's (M: 15.62*, -0.68, -4.17%) gift?certificates (one $100 card, one $50 card). Discover (DFS: 15.15*, -0.12, -0.78%) also offers bonuses on its cash-back cards when you opt for gift cards instead, turning $20 cash into a $25 Borders card.

3. Buy Secondhand
Gift card swap sites PlasticJungle.com, GiftCards.com and GiftCardsAgain.com purchase unwanted store gift cards from consumers, verify the balances and resell the cards to other shoppers for up to 30% less than the card's face value. Such cards may not be ideal presents -- many are for odd amounts, like one for Bath & Body Works spotted at GiftCards.com bearing a balance of $70.54 (you'd pay $61.37, a 13% discount).

Such sites are a better resource for shoppers looking to snag an extra discount at stores where they already plan to shop, says Stacy Janiak, who handles U.S. retail for consulting firm Deloitte. "You can almost look at those as a different form of coupon," she says. "It's another $10, $20 in your wallet." At PlasticJungle.com, a $25 Godiva Chocolatier card goes for $17.50 (a 30% discount).

4. Check Discounters
If you're a warehouse club member, take advantage of low-priced gift cards available in stores and on the clubs' web sites. Costco (COST: 59.41*, -1.46, -2.39%) has a $57.50 Cinemark Theatres card for $40 (a 30% discount), and BJ's Wholesale Club (BJ: 32.67*, -1.64, -4.77%) has a four-pack of $15 iTunes cards for $57 (a 5% discount).