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Why I'm investing in a supermarket gift card

My local store is offering a 10% bonus. I'm in, even though I haven't used up last year's card yet.

By Donna_Freedman Mar 19, 2010 12:06PM
Want a guaranteed 10% return on a short-term $300 investment? I do. That's why I'm going take advantage of the "Refund Rewards" program at Albertsons. If I buy a $300 supermarket gift card, Albertsons will tack on an extra $30. (I could also get a $250 store gift card, but it carries only a $20 bonus.)

The idea is that you'd use some or all of your income tax refund on these cards. Families or individuals who spend more than $300 a month on food might want to get more than one. Myself, I don't buy too much at a time; in fact, the $330 card I bought last April still has $154.87 left on it.

So why get another one?

I plan to spend a chunk of that $154.87 on gift cards for another frugal vacation. Next week I'm heading to see my daughter and son-in-law in Phoenix, and I want to get some restaurant gift cards so we can go out to lunch.

I'm going to spend what's left on more gift cards to use when I take a housesitting job for part of the summer in Anchorage, Alaska. I want a movie gift card so I can see a blockbuster or two with my best friend, a Red Robin gift card so I can buy her a sandwich afterward, and at least one McDonald's gift card because my great-nephews like to eat in a place that has a sliding board.
Because I've been living frugally I have no debt, I've established a strong emergency fund, and I've set up retirement investments -- and I can still free up $300.

The pros and cons
Of course, I'm also locking up that $300. It won't be liquid any longer. All I'll be able to use it for is groceries and gift cards.

That's why this plan isn't a good one for those who are in debt and/or living paycheck to paycheck, or who have zero in the way of retirement planning. You'd be much better off using your tax rebate to pay down the credit cards, establish an emergency fund or invest for the future.

And maybe you may agree with MSN Money columnist Liz Pulliam Weston in thinking that gift cards are not gifts. To some extent I feel this way, too. Presents, I believe, should require at least a little thought on your part rather than just a bunch of grabs from the "gift card mall" in your supermarket.

I also agree with Liz that if you do buy or get a gift card, you should take these steps to protect yourself.

Sometimes it makes sense
That said, I'll admit it: I have given gift cards as birthday or holiday presents. For example, I wouldn't presume to guess what a teenage nephew or niece might want to wear. Much better to find out where he or she likes to shop and give some scrip.
As for protecting myself, this year I'll turn the $330 card into a bunch of smaller Albertsons cards, in the $25 to $50 range. That way I won't be carrying around the entire amount, which is what I've been doing all year. Had my wallet been lost or stolen, I'd have been out of luck.

Incidentally, I don't even know whether I'll be getting a refund, because my taxes aren't done yet. But I'm buying the card anyway.

Thanks to stealth stock-up, I've got a full pantry and freezer. I've decided to clear them out, just to see how long it will take. (The canned and frozen stuff won't last nearly as long as the 30 pounds of pinto beans and 12 pounds of rice, I expect.) Since I'll be using the card mostly for fresh items, $330 should last quite a while. With luck, I'll be in the same position this time next year.

How about it, readers: Are any stores in your area adding bonuses for gift cards at this time of year? Will you buy one? More than one? Why or why not?

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