shitrus

Man you guys are paranoid as all get out.

Ive run through 130 of these so far and they all post. If they don't post, call them up and start a ticket. They don't care. They wouldn't offer this product if they didn't make money on it.

They don't get to hang on to unused funds in the gift card, by law they have to turn that over to the unclaimed funds division in your state.

They make money on selling you the giftcard. Blackhawk makes money by gathering the swipe fees from businesses that you use the card at.

It is not difficult to understand.

I was talking to the lady at the place where you can buy them, and she said a casino comes in ad asks for 25-100k worth of $10/$25 cards all the time.

They aren't going to be irritated with you asking for $1.25.

financialhippie

I'm not quite sure it's that easy though. Think about it, Simon makes $3.95. Easy, done, less than 1%. Blackhawk makes what, 2%? 3% on their transaction fees? So that's a maximum of 4% right? I you're using the card entirely at stores that issue 5% back, then Simon + Blackhawk would be losing money somewhere right? 4% is less than 5%. Fact.

If I had to guess, Simon is betting on people not using these cards only at the 5% list of participating merchants. Not only that, but they've probably got a mathematical formula to calculate their risk. Simon is a big company, they'd be crazy not to assess the number thoroughly. I can't imagine they're assuming that they'll have to pay out 5% back on the full card value every single time.

How would they (Blackhawk or Simon) make any money?

If Simon pays, they're way under on a $500 card. $3.95 revenue for $25 loss.

If Blackhawk pays, and we're assuming a flat 3% on fees, they're coming out behind on a $500 card too. $15 in revenue for $25 loss.

Even combined, they're behind: $18.95 combined revenues against $25 payout. That doesn't even include the next payout of $5 on the $25 remaining if you use it at one of the listed merchants again.

Unless the stores have to pay some of the 5% kickback...

If I had to guess, they're not selling them because
They're probably still selling them because they haven't realized that they're losing money on them yet.

By all means, hit it hard if you want to, but I wouldn't bet my life on these cards sticking around forever because anyone is making money.

The only people making money are us

geclub1

This is actually not true. In most states that I read up on unclaimed fund statues.

brajalle

The stores undoubtedly pay a decent chunk, possibly all, of the 5% kickback. They're paying to drive business to their store, it's really no different than a shopping portal offer, referral link, coupon, or sale to them most likely.

shitrus

People like us aren't the only ones who buy these cards. We make them lose money. They sell far more cards to people who make them money than people who lose them money. In the end its a net positive in their favor, so of course they are still going to sell them.

shitrus

Lets just stop for a second. Even if they lose all that money, they still earn money on the other aspects of the card.

So they are in the black.

If they get to keep all of the balance of the card after it expires or whatever, then they are even more in the black.

What you are saying wont prevent them from making money, so its a moot point to argue about whether or not this will affect them. It wont (at least negatively)

financialhippie

I feel what you're saying, but that doesn't really matter for the cashback. Somebody has to be paying that cashback: Simon, Blackhawk, or the stores (like CVS) themselves. If Simon/Blackhawk are paying the cashback, I personally don't understand how the cards could be profitable, without exorbitant processing fees.

If the stores (like CVS) are paying the 5%, then the cards will definitely stick around until the stores get smarter. I see the stores 'getting smarter' in one of two ways:

1. Hardcoding cash registers not to allow VGCs on gift card purchases.
2. Removing themselves from Simon's 5% merchant list (probably easier and more likely).

For Simon, they don't care what I buy from CVS...a $500 Vanilla card or 500 packs of gum. But CVS might. Once CVS's Five Back cardholder market segment reaches some critical mass, they're going to start caring what exactly is being purchased with those Five Back cards. If everyone bought gum, they might be able to profit even after the 5% payout, I don't know. If everyone buys Vanilla Visas, I just don't think their profit margin would be high enough to sustain the 5% back on the card. I guess I just don't think this is permanently viable. Either CVS or Simon is going to lose revenue, period.

The only way they won't, is if a substantial number of Five Back cardholders use them at stores that don't give the 5% back. Ludicrous to me, but then again, that's part of the reason I'm here.

I think it's safe to assume Simon only makes money on the activation fee, and even some of that might go to Blackhawk. So if the stores have to pay out, CVS, at some point, is going to say, "Wow, these Five Back cards are reducing our bottom line." Why would CVS continue to support that system?

I mean, how long, really until this is all over blogs and the internet, and people start lining up in droves to buy them? At some point, Serve and Redbird hit critical mass, and shortly thereafter, they were canned. The same thing will happen here I bet.

Of course, I also have a tendency to overhthink things

dethkultur

I've tried to understand this myself, here's what I have gathered.

Blackhawk takes the risk. The stores sell them like merchandise and make a decent margin, 6-9%, on every purchase.

Blackhawk still makes money by deals with retailers (for store cards), transaction fees (maybe 1-2%, but higher for smaller purchases) and by lossage/dormant funds, which is big, real big.

This explains nearly every retailer has a gift rack now, puts them in your face by the register, etc. 10 cards on one hanger is a good use of shelf space (equivalent to $5000 in merchandise perhaps), and retailers are very deliberate about making the highest payback for every inch, with eye-level visibility getting the most juice. They do not back these cards in any way.

Blackhawk tries different things to get your attention, I assume this 5 back is one of them. I've seen OVs branded with Duck Dynasty, Alabama football, and there will be other hooks to get you to choose it over another. These things are profitable when used as Blackhawk hopes you'll use them.

Happy

This is strange - when spent $499.95 some cards earn $25 rebate as it should, with the round up explained on the FB site, but some cards earn $24.99 without the round up. Could not figure out WHY it is the case. Unless if 2 FB cards are used at the merchant on the same register, the 2nd rebate does not round up... But that wont explain the difference because I kept good records on the sequence of cards. All of them were used in debit mode with full payment.

While it is only 1 penny difference, nonetheless it should not happen if everything is done automatically.

financialhippie

Hmmm interesting. That all makes a lot of sense, and makes me wonder when Blackhawk/the stores will decide it no longer works for them then. I bet Simon is happy just to be pocketing the $3.95 each time I go buy one!

Happy

Remember when Simon first offers their GCs the fee was only $2.95. After they saw a surge in demand they later raised it to $3.95 - they keep the $3.95 level since than because if they raise it one more time, they lose the edge when many other cards are at $4.95.

While we dont know how much retailers make selling generic gift cards (not their own - Simon's is a generic card that can use anywhere), I dont believe they get all the activation fee. They may get to share the spoilage though the spoilage would not be recognize until 2 years or more have past from the initial purchase IIRC.

cdog999

Besides simon, gcm,od/om are there other places to buy these? There is no simon close by.

Prometheus77

Some grocery stores have them on their gift card racks,but only in $0-200 variable load cards.

ibleed0range

Stop trying to analyze how much all the players profit or lose and just be grateful. It's all hearsay you guys have no clue what your talking about.

Sandybestdog

They could raise it to $5.95 and I doubt they would lose business. The advantage of Simon is you can go grab 4 or 5 of these and nobody is going to think twice. Whereas at other places, I only buy one because you get questioned and id'd and need a manager override. At grocery stores I also try to combine the purchase with a few other items as well.