Gift card trade hits new high

As gift cards have risen in popularity over the years (a whopping $87 billion of them were bought last year, according to research firm TowerGroup), you could be forgiven for assuming that they're the perfect, one-size-fits-all holiday gift.

Apparently some of the people you gave those ultra-convenient cards to didn't see it that way.

Plastic Jungle, a clearinghouse where people can buy and sell their unwanted gift cards, says its Web site traffic has gone up by an astronomical 250% since Christmas.

The bump is due to people unloading their gift cards for cash. Plastic Jungle lets people sell their cards at a discount and then sells those cards at a slightly less-steep discount, pocketing the difference.

According to Plastic Jungle's stats, the top-swapped gift card is Macy's, followed by Walmart and then Lowe's. California was the top state for both gift card buyers and sellers. New Yorkers were the second-highest purchasers of gift cards, while Floridians were the second-highest sellers.

Why is the gift-card trade so hot? For buyers, it might be a chance to get a gift that they really wanted for themselves. For the sellers, it's obvious: They get a quick hit of cash in their pocket, even if they take a loss on the value of the card. Plastic Jungle's press release says as much, noting that some sellers liquidate their gift cards to pay off holiday debts. After all, you can't pay a MasterCard bill with a Starbucks card.

The TowerGroup report offers a few other clues on the popularity of sites like Plastic Jungle. Although the top cards traded on that site were for a specific retailer rather than general purpose cards, Tower stats indicate that the purchase of general purpose cards went up last year (in contrast to a dip in store card spending).

Those general purpose cards often come with a slew of fees that chip away at the underlying value, including expiration dates. It's certainly possible that thrifty-minded recipients are opting for cash now rather than have the value of their gift eaten up by fees.

According to Plastic Jungle, there's a $30 billion "unredeemed gift card economy" out there. That staggering amount would seem to drive home a point made in another Walletpop post shortly before the holidays about the poor economics of gift-giving.

In a nutshell, the best gift to give is cash, because value is lost every time you give a gift the recipient doesn't really want. Maybe they stick it in a desk drawer, or maybe they hawk it on a site like Plastic Jungle. Either way, it's not very "traditional," but if you really want to make a gift recipient happy, give them cash.
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