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November 07, 2007


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Typically the fees apply only if you're buying a VISA/MC/Amex/Discover branded card, and are clearly stated on the card package. The fees are usually substantial enough to negate the value of any rebate you might receive.

Great idea. I am thinking about buying an HDTV this year, it might be worth it to buy $500 in gift cards at the grocery store, get my $15 reward and use the cards to buy the TV. Not to mention the gift cards I'll actually give as gifts for the holidays.

In my experience, the store gift cards (Best Buy, Circuit City, Target, etc) don't have service fees. Like Mel said it's usually the prepaid Visa/MC that have those ridiculous fees. I looked into buying a Visa branded card from a local bank for a gift last year and the fee was $2.95 on a $25 gift card. I decided just to give a store gift card.

There's a super market chain in the Ohio/Pennsylvania region called Giant Eagle, which also runs its own gas station called Get Go. For every $50 of purchases made there, they normally give 10 cents off per gallon of gas, and 20 cents during promotional periods (such as during holidays), up to 30 gallons.

The great part is they sell gift cards to everywhere you can think of, so they make great Christmas gifts and even paid for my bathroom remodel at Home Depot, getting me quite a few gallons of gas.

The fees on the VISA/MC/Amex/Discover gift cards sold at grocery stores really aren't that outrageous--here's why:

Those cards are more "like cash" than the store cards they're also selling. Think about it, you can use them almost anywhere for anything. The profit for the store selling them typically is derived only from the fee that's charged on top of the card value, the card issuer gets all of the face value portion (making its profit from the interchange fees when you use the gift card).

When your grocery store is selling another store's giftcard, that's a different story. The grocer gets a fairly substantial commission (usually 10-15%) off of the face value for activated cards.

It's really a win-win-win all around. The grocer gets a nice commission, you (the smart credit card user) get a nice rebate, the retailer gets someone who's almost guaranteed to walk through their door and spend at least as much as they have on a gift card.

And there's potentially more profit for the card issuer, as they can invest the funds from your giftcard purchase until that money is spent. Or maybe you'll put the giftcard aside and forget about it or lose it. Believe me, that's figured into their profit models, as well.


Word of caution before buying that HDTV: Yes, this will work. But if something goes wrong with the transaction and you're in a dispute with the merchant, you no longer have your credit card company to go to bat for you with a chargeback. Is that really worth the extra $10 you might yield through buying via gift cards?

Good call, Mel. But I was thinking I would put the balance on my credit card anyway, so I would still be partially protected.

Enjoy this perk while you can.

Not to take this too far off-topic, but within a year or two, the technology will be in place to readily identify certain items purchased on a credit/debit card. This is in response to the VISA/MC branded healthcare account spending debit cards, which are supposed to only be used at merchants identified as healthcare-related providers for healthcare-related expenses.

These cards can be abused, allowing you to buy a deck of playing cards with one--if you do it at a CVS store. On the flipside, you can't use it at a grocery store, even if all you're buying is aspirin. (Unless you use it at their dedicated pharmacy register, if they have one.)

Point being, I can see the card issuers applying the same technology to exclude certain purchases (such as these) from rebate eligibility.

To paraphrase Dave Ramsey, how many millionaires made their money off of credit card rebates? The less playing with credit cards, the better.

Gary - If I'm going to buy $100 of groceries a week, why would I pay cash when I can use my credit card and get 3% back? Multiply this by 52 weeks a year and it adds up.

Not to mention the cash I have stays in my bank account earning interest until my credit card bill is due.

Will I become a millionaire this way? No, but I like getting $50 checks in the mail every couple months for basically doing nothing.

You can buy a BP gas gift card or a shell gift card at Wynn Dixie Grocery store (in FL) & get that cash rebate.

Everyone can use gas cards so it's a win - win.

This is a great idea! I've recently become obsessed with cashback and other rewards credit cards to benefit from the extensive travel I do for my job, and this is one more way to maximize the benefits. Thank you!

This is cool provided that the rebate is higher than the service fee - $3.95 even on a $100 is higher than 3% rebate unless you spend enough to get to higher percentage - I usually don't. I wouldn't use it for HDTV though - as it was mentioned it's nice to have some protection in case of a dispute. Additionally, as I understand it, AmEx doubles the time of manufacturer's warranty, so I'd rather use it for electronics purchases.

"To paraphrase Dave Ramsey, how many millionaires made their money off of credit card rebates? The less playing with credit cards, the better."
Given that most of Dave Ramsey followers are people with consumer card debt or those who used to have cc debt, the advice might hold for them. But those of us who can use credit without getting in consumer debt (i.e. have a history of paying balances in full), there is no reason to say "no" to free money. Of course, small things like this will not make you a millionaire, but wouldn't you pick up even a few dollars if you had seen it on the street?

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