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Gift card exchange websites ring up post-holiday sales

Mark Milian
Gift cards are among the top holiday gifts, which has sparked an aftermarket for trading them for cash.
Gift cards are among the top holiday gifts, which has sparked an aftermarket for trading them for cash.
STORY HIGHLIGHTS
  • Several websites have emerged that allow customers to swap gift cards for cash
  • Payouts are generally less than the value of the gift card on those sites
  • Consumers also can exchange cards at online marketplaces like eBay and Craigslist
RELATED TOPICS
  • Shopping
  • Craigslist.com
  • eBay Inc.

(CNN) -- Thanks to a rising aftermarket for gift cards, someone who got, say, a $50 credit to Macy's over the holidays can quickly turn that into a credit for Amazon.com or even a check.

Websites that let users exchange unwanted gift certificates gained major traction after Christmas, as more consumers went online to find a preferred gift, or even cash.

"What we've seen is a trend that begins to accelerate in late November and continues all the way through the holidays with a specific and significant spike post-Christmas," said Bruce Bower, the CEO of Plastic Jungle, one of the most popular websites for exchanging gift cards.

In December, Plastic Jungle experienced a sixfold increase in both the selling and buying of gift cards, compared with the same period in 2009. The company sold more than $10 million in gift cards last year.

For Plastic Jungle and similar sites, the post-holiday season capped a frenetic monthlong marathon that can set the tone for business the following year.

But consumers are finding they have to give up a few plastic dollars in the transaction. Such sites charge a fee to swap gift cards, and if you want cash, you'll get less than the card is worth.

If you still have unwanted holiday gift cards lying around and want to exchange them, the process works like this:

You can register gift cards you want to sell with Plastic Jungle or other sites. The system calculates how much it will pay out based on the store and the value of the card.

Then, you'll be asked to mail the card using a prepaid envelope. Plastic Jungle partners with some retailers that verify the cards instantly and automatically pay to a PayPal account. Shoppers can search the site and get cards at discounted prices.

Plastic Jungle has been around since 2006, when gift cards first achieved their still-current status as the top holiday gift category in the U.S., according to a report by the National Retail Federation. Americans were expected to spend an average of $145.61 on gift cards during the 2010 holiday season, a 4% increase from 2009, according to the survey.

But Plastic Jungle is seeing new rivals emerge, as well as consumers flocking to general online marketplaces like eBay and Craigslist.

eBay lists hundreds of cards for popular retailers that receive bids for pennies less than -- or, in some cases, more than -- the certificate's value. But for those looking to hawk gift cards, eBay's auctioneer pool can be hostile to sellers who haven't already built a reputation on their profiles.

And Craigslist, the free classified ads site, has no mechanism for verifying the card's or the seller's legitimacy.

Other services, like GiftCards.com and CardWoo, offer guarantees to buyers that are similar to Plastic Jungle's -- assurance that a card will work and come with the expected value.

For sellers, Swapagift.com partners with brick-and-mortar stores in many cities to provide drop-off locations, so customers don't have to deal with the Postal Service.

But the potential for crooks using these systems to cash in from stolen credit cards could create problems for these businesses, said Dan Horne, a marketing professor at Providence College's business school in Rhode Island.

Horne said he "can't really figure out the business model" for these companies, "given the [narrow profit] margins and the competition."

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