Day #142: Et tu, CardWoo?

I keep hearing all of this hype about CardWoo, and with the holiday season officially kicking off this Friday, I felt a duty to check it out.

Who or What is a CardWoo?

CardWoo is an online market place that buys and sells gift cards. The premise is that many people receive gift cards that they never use and they end up lying around in their drawer collecting dust. CardWoo will buy those gift cards from you for 50 – 90% of their face value and resell them on their site.

Too Good to be True?
Since CardWoo was endorsed on The View, I figured it was legitimate. To sell, you register on their website and within 3-5 days they will send you an insured, postage-paid pack to mail off your unwanted gift cards. They will only accept cards with a minimum balance of $20 and do not accept paper gift certificates. After they receive your cards, they will send you a check for approximately 50 – 90% of the value of the cards that you submitted. You will have 14 days from the date on the check to notify CardWoo if you are unhappy with your payment. If so, CardWoo will return your gift cards to you once you return the check.

To buy, you simply browse their website and place the cards you want in your shopping cart and check out just like you would with any other online merchant. From just a casual glance, I noticed that they discount the gift cards they sell anywhere from 5% to 15%.

What’s In it For Them?
OK, here’s the skinny. CardWoo is acting as a market maker in the gift card market. They accept buy and sell orders for the cards and make money off the spread (the difference between the price they pay and the price they charge). For example, let’s say you have a $100 Best Buy card. CardWoo will pay you $50 to $90 for that card. Then, they will turn around and sell it for $85 to $95. Since those are broad ranges, let’s just use the midpoints for the sake of simplicity. The bid on that Best Buy card would be $70 and the ask would be $90 which makes the bid-ask spread $20 – a tidy profit for the CardWoo folks. Given this logic, you could estimate that they are making about 22% on average. However, my guess is that they – as any profit-making entity should – try to maximize their profits. In that case, they would try to buy cards as cheaply as possible and sell them at the highest possible price. That means that in our Best Buy example, they might pay you just $50 and then sell your card for $95. That would make the spread $45 and net them a handsome profit margin of 47% before their administrative expenses. My guess is that this would be their best-case scenario.

What’s in it for You?
On the sell-side, my sense is that CardWoo amounts to a modern day pawn shop. Pawn shops aren’t a bad thing – particularly if you are long on stuff and short on cash – as long as you realize going in that you are not going to receive what your items are truly worth. Pawn shops, cash-for-gold merchants, blood banks and CardWoo are all targeting the folks in need of liquidity. What is different about CardWoo is that they also appeal to the folks who aren’t necessarily desperate for cash but are looking to turn unwanted items into cash (think eBay). This is likely the better way for consumers to think about the CardWoo sell-side because if you need cash in a hurry, you’re going to be better off at your local pawn shop or blood bank than waiting for the WooPack, sending it off and then waiting for the check which will likely take about 10 – 14 days altogether.

On the buy-side, it’s not a bad deal. Assuming that they have checked out the cards and guarantee their validity, you can buy and item for less than its true value. Since they say that shipping is always free, it’s worth considering. The only downside is that their supply is limited since it is dependent upon the activity in the sell-side. Currently, they have a little over 200 cards available. You can’t order certain vendors or dollar amounts and they don’t deal in bank cards like Visa, American Express, etc.

The Bottom Line
If you are desperate for cash, try something else. If you want to dabble in the gift card ‘market’, CardWoo is a viable alternative to eBay. You can buy and sell gift cards on eBay too, but with much less transparency regarding the parties with whom you are doing business. If you have gift cards lying around that you can’t/won’t use or re-gift, give CardWoo a try. In the worst case, you turn down their offer. If you want to buy a gift card, check them out. You might just stumble on a great deal!

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