The Pros & Cons of Gift Card Churn

Gift card churn is the art and science of buying, selling, and using gift cards to save money or earn rewards. It’s time-consuming and easy to make mistakes, but done right, it can be surprisingly valuable.

To understand the pros and cons of the potentially lucrative side hustle of gift card churn, we need to learn the basics.

Gift card churn defined

At its foundation, gift card churn consists of three steps:

1. Buy a gift card, preferably at a discount below face value, usually using a rewards credit card. Or, get a gift card for free with a gift card rewards program.
2. Use that gift card to make purchases or sell the gift card for more than you paid for it.
3. Reap the rewards.

For instance, for several years in the 2000s, the U.S. Mint sent dollar coins purchased from their website with free shipping. During the pre-housing-crash credit market, 5% cash-back rewards cards were not uncommon. So, if you bought the coins with a rewards card and deposited them in the bank, then paid off the card during its grace period, you would net a 5% profit for each purchase. 

That free shipping and high cash-back rewards are a thing of the past, but this illustrates the core concept of gift card churn. It’s not, however, the only model. Other standard strategies include:

• Buying gift cards to meet credit card sign-up bonus thresholds.
• Buying gift cards to meet credit card bonuses for high spending.
• Buying gift cards to earn extra points and miles.
• Buying gift cards to earn elite status for airline and hotel memberships.
• Buying gift cards for resale at a higher price.
• Buying gift cards at below face value to use for purchases you would make anyway.

Gift card churn is a typical enough side hustle that a variety of online resources exist to help people fine-tune and perfect their approach. Before you dive in, though, it’s essential to understand the pros and cons so you know if it’s right for you. 

Benefits of gift card churn

Free money

A quick gift card churn can net you $100 for as little as 10 minutes of your time. That’s theoretically $600 an hour without any serious physical or mental labor. You can’t make as much as an eight-hour workday with it, but it can be surprisingly lucrative for the time and effort involved. 

Strong support structure

Many online sites, communities, social media groups, and other resources are dedicated to helping people successfully churn gift cards. It doesn’t take long to find start-up tutorials, advice on fine-tuning, and troubleshooting help to make a gift card churning enterprise successful. 

Synergy

It’s easy to buy a discounted gift card and then spend it to buy its face-value worth of goods. But the synergistic power of gift card churn can be powerful.

For example, you can buy Alaska Airlines gift cards at Costco (available regularly at 10% off face value). There’s a limit of $5,000 worth of cards per customer. 

Imagine you need $4,000 worth of airfare for a future trip. You buy Alaska Airlines gift cards using a travel miles card with the following benefits:

• You get a $400 discount off the airfare from the 10% off Costco price.
• Adding $4,000 worth of travel rewards to the card you bought them with can be enough to discount hotel costs deeply.
• That much spending can qualify you for extra checked baggage, free in-flight meals, or club access while you’re in transit.

This is a simple example of how a single gift card can enable you to cash in across several areas if you make the right purchase with the right card at the right time.

How it works with regular spending

Some people purchase gift cards for resale, which is often the best strategy when your focus is generating extra cash. It’s an arbitrage sale, just like any other kind of flipping. 

However, you can also earn cash with your regular everyday purchases. You can use grocery gift cards and restaurant gift cards for your meal needs, gas gift cards for your car, retail gift cards for regular purchases, and cash-equivalent gift cards like Visa or American Express for everything else. 

Doing this provides a variety of benefits. First, you save money on each purchase made with the card by buying it at below face value. Second, your purchase of the gift card accumulates points on your credit card rewards. Third, you can scan your purchase receipts to get points, that you can use to get earn more gift cards.

Disadvantages of gift card churn

Difficult to scale

One of the benefits of gift card churn is how simple it is to make some money. But once you start earning large amounts of money, keeping track of everything becomes exponentially more complicated.

It’s possible to automate some of the tasks, but scaling this to significant savings, rewards, or income is complex and challenging. 

Risk of theft

If you buy a gift card on a marketplace, the seller might criminally or accidentally use its codes after you pay them. When selling physical gift cards, shipping this cash equivalent carries all the risks of sending other valuables by mail. Loss from theft is a common risk that comes with some forms of credit card churn.

Risk to credit score

A large percentage of your credit score is based on what percentage of your available credit you use. The more credit you have available, the higher your score. If your credit cards make their monthly report after you’ve purchased gift cards, it could impact your score.

This isn’t a huge deal if you’re not seeking additional credit, but if you’re applying for a loan, the increased interest rates and fees could rival or exceed what you make from your churn. 

Informal regulation

Gift card churn is legal, but many gift card and credit card companies have policies in place to make it more difficult.

For example, some gift cards ban multiple resales of the same card. If you happen to be the last resale before the limit, you can be out of luck. Purchasing gift cards with gift cards is also frequently declined.

The rules are complex and poorly publicized, so you can take a loss through no fault of your own just because you ran afoul of how card companies want you to use their products. 

Final thought: Buyer beware

Running a gift card churn can be profitable if you’re detail-oriented. The details of purchasing certain cards and knowing when to liquidate them will define your successes and failures. 

Similarly, the financial progress a churn gives you won’t be large-scale. It will be in the details of percentages saved, reward qualification, and lower prices. Gift card churn is an excellent strategy for people who care about and consistently focus on the details.

The best app to earn gift cards and rewards

If you are interested in creating your own gift card churning strategy or optimizing your current gift card churn, Fetch is the perfect app to earn rewards and get more gift cards.