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Living on Gift Cards Saves Money for A Stay-At-Home Mom

By Mercator Advisory Group
March 31, 2011
in Analysts Coverage
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Biometric Mobile Payment, virtual cards, Biometric Credit Card Technology

Biometric mobile payment concept with realistic smartphone with fingerprint login application and credit cards set vector illustration

Time has an interview with Ashley Grimaldo, a Texas Mom who uses third-party gift card resale sites as a way to buy gift cards at a discount and thus save her family money. In an accompanying video, Grimaldo says that credit cards and debit cards led her to over-spend. So she decided to purchase gift cards at a discount and make all her purchases using the cards for a month. What is interesting is that Grimaldo’s project aims to go squarely against the consumer tendency to spend more than the face value of the card. Because she is purchasing the cards from a resale site, the retailers do not stand to lose in these transactions (unless they are selling the cards themselves), but it is easy to see where this might not be their preferred method of having customers go to the store to buy cards.

Along the way, Grimaldo uncovered some of the drawbacks to third-party resale sites; here is one example from the Q&A on Time’s money blog site:

What are the biggest headaches and hurdles you’ve encountered living exclusively off of gift cards?

AG: Finding out limitations on merchandise credits has been a big hassle. Some gift card resale sites don’t discriminate between gift cards and merchandise credits, which can amount to huge buying restrictions–plus expiration dates are different. A Gymboree merchandise credit I bought could not be redeemed online, but after using it in a bricks and mortar store (which had more expensive prices than the same clothes online) I couldn’t earn Gymbucks. Their rewards program was offering $25 off the next purchase of $50 or more and I had to pass it up using the MC. Plus, technically, I wasn’t supposed to use a credit at all unless I was the one who it was issued to.

Although Grimaldo is focused on saving money for herself, given the way she purchased the cards, she is likely saving the money for the retailers as well. One advantage of a closed-loop card, from the retailer perspective, is that they do not need to pay interchange on those purchases. Since the third-party resale site pays on the interchange of the purchase transaction, the retailer is saving the costs from her making the purchases with her credit or debit card. The math on this is murky, but an argument can be made that gift cards are a less expensive form of payment for the retailer.

One issue that Grimaldo’s challenge side steps is that it takes credit and debit cards to make purchases at the online discount sites. So, it is not a full proof method of budgeting. But the Time story and Grimaldo’s own blog reveal some interesting quirks to gift card resale sites and gift card returns.

Still, the blog does provide evidence for something that Mercator Advisory Group has seen in its CustomerMonitor Research, namely that consumers use prepaid cards of all kinds for budgeting. This behavior could lead to marketing opportunities for prepaid card providers and retailers who could tap into a new type of client, the budgeter, with different promotions that set the retailer apart from its competitors.

Read the full story here: http://money.blogs.time.com/2011/03/31/qa-saving-money-by-living-exclusively-on-gift-cards-for-a-full-month/#ixzz1ICDHLSbR


Read Grimaldo’s blog here: http://www.giftcardgranny.com/blog/category/challenge/


The CustomerMonitor Prepaid Report: http://www.mercatoradvisorygroup.com/index.php?doc=Primary_Data_Series_(PDS)&action=view_item&id=512&catid=20

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