How not to buy gift cards on eBay

I don't remember what prompted me to poke around on eBay to check for gift cards.  I do remember that there had been some restrictions placed on gift card sales on eBay because of rising occurrence of fraudulent activity.

However, I did find a new practice that I found a little hard to believe.  It was hard to believe because I couldn't imagine too many people buying a gift card this way.  Yet a number of sellers were doing it.

Here's the idea:

1. List a gift card (say, $500 face value)
2. Charge more than the face value (one I saw listed a $500 card for $569.00 + $4.00 shipping)
3. Explain in the auction how to get cash back by going through rebate sites to bring the price down below retail

So, you start in the hole — $73 in the hole for this particular auction — and then it's your job to work your way back up to even, or maybe a little bit ahead.

Doing it that way sounds more than a little dumb to me.  I'd rather buy the card with the discount up front.  Wouldn't you?

But, I'm glad that there are some sellers that tried to sell gift cards this way, because they were almost required to show how to do it right in the auction.  No one would pay $569 for a $500 gift card unless it was fairly clear before they bought the card how that this could be made to be a good deal for them.

Which means the following:  We can now get great deals on gift cards by (a) using the information in these overpriced auctions BUT (b) applying them to auctions where people are already selling the card for less than face value.  Here's the right way to go about it:

1. Find someone selling gift cards for the store you want.  Ignore anyone trying to sell a card for more than face value. You want to be ahead from the start!  (Also of course do due diligence like checking feedback ratings, track record, etc.)
2. If you haven't signed up for eBay Bucks, do that.  It's 2% back on qualifying eBay purchases, courtesy of eBay and PayPal.
3. This one has a time crunch on it (30 July 2010) but you get 8% back from Bing if the purchase qualifies and it's a Buy It Now.
4. If there's no time to do the Bing thing, then you can check out other rebate programs to see which one treats you the best.  Be sure to click through the links to eBay from the appropriate sites to get the rebates:
   • MrRebates.com offers 3% back on most eBay Winning Bid and Buy It Now purchases (up to a rebate of $30 per order) plus a $5 signup bonus
   • EBates.com offers 1-3% back on most purchases, with some categories allowing up to $100 back per transaction
   • Cashbaq,com offers 2% back on most purchases, with a $25 limit per order
   • BigCrumbs.com offers 36% of whatever seller's fees eBay earns on the transaction (this can be over 5% of the purchase price!) along with certain restrictions
5. The icing on the cake is using a rewards credit card to make your purchase through PayPal.  Add an extra 1% or 2% right there.

That's the right way to by gift cards on eBay.  Start with a discount with a lower-than-face-value purchase price, and go down from there!

(Thanks to Beating Broke for including this post in the Carnival of Personal Finance!)