Introduction
Grab a coffee and sit back for this story. About 5 years ago, a coworker gave me a $10 iTunes gift card. At the time, I didn’t buy any iTunes apps or music or games, and decided to just put it in my desk. Eventually I got around to cleaning out my desk one day and still unsure of what to do with the card, I decided to just ebay it off. I then went on ebay and noticed that it was selling for $12.50. Odd. Why would someone pay $12.50 for a $10 gift card?!? I looked at other denominations and saw the same pattern – higher prices than face value. After doing some research, I found out that international customers could not buy certain movies, TV shows, etc from their localized version of iTunes. Therefore, if a guy in Germany wanted to watch say “Mad Men,” they would need a US iTunes account with a US address and a US credit card to pay for it. They could easily Google a US address, but there is no way for them to get a US credit card. And that’s where the US iTunes gift card comes into play! They could create a US iTunes account with a “fake” US address and then “load” their account with the US iTunes gift card to let them purchase from the US iTunes store.
Ramping Up
My first sale sold for $12.50. Ebay and PP fees were $2.17, so my net profit was $10.33. A month later, Best Buy had a 20% sale off iTunes gift cards. I was able to buy a $50 gift card for $40, which I sold for $55. After fees, that netted me a profit of $7.91 and a margin of 14%. I started to buy $100 cards and sold them for $109.50. I then scaled it up even further. At the time, Best Buy paid out for Best Buy gift cards via shopping portals, and so I’d buy a $100 Best Buy gift card first to make 5% via the shopping portal. Then I’d loop back around and buy the iTunes gift card using that same Best Buy gift card to make another 5%. I was also a Rewards Zone Member that got me another 1% back. Therefore, a $100 iTunes card would cost me ~$70 and I’d sell it for $109.50 ($97.67 after fees, margin of nearly 25% per card). Eventually I noticed that other sellers would list the gift card in the ‘consumer electronics’ category, which had lower fees than the ‘gift card’ category. This saved me $2 in fees and raised my margin to 27%! The only drawback was that ebay limits you to only 1 gift card sale per listing. You couldn’t list a fixed price listing for 100 quantity. You’d have to sell one-by-one, and so as soon as you sold one, you’d have to relist the listing. When I relisted it, it took nearly 6 hours for the listing to pop back up on ebay, thus the most I could sell in a day was 3. There were other sellers that had relistings pop up immediately and so they could sell 10 or so per day. I called ebay once to ask why that is, but the first line rep had no clue. I didn’t pursue it any further although I checked off and on (if anyone knows, please enlighten me.)
Moving off eBay
Eventually, I asked my buddy to create a web site for me. This way, I could avoid ebay’s fees. I still would have to pay Paypal fees, but my margin would be even higher. The web site is still up here – http://mygiftcodes.com. It ran eJunkie in the background. It was pretty slick. I would load the gift card numbers onto eJunkie, which managed my ‘inventory’ of codes. A customer would check out on my web page, and as soon as they sent payment, eJunkie would email them the code. The system had its flaws at the beginning, but it eventually worked as intended.
Chargebacks
Things had been going smoothly for a couple of weeks, but then my first ‘unauthorized payment’ Paypal chargeback happened. This meant that the buyer’s account or credit card had been used without their consent. That or my buyer is trying to pull a fast one on me. Paypal asked that I send proof of shipment information. I sent them the screenshot of the ebay message I sent with the gift card code in it. Of course this didn’t fly and Paypal chose in favor of the buyer proclaiming that I can not sell digital goods (ironic how they can sell digital gift cards these days on ebay.) This began to happen more and more, and for some reason, more so in Australia and England. I eventually banned those countries from buying from me on ebay. Then weeks later, I’d get a fraud from a guy in France or Italy. A part of me wanted to ban all of Europe, but I noticed that German buyers were one of my best customers. In hindsight, I should have also banned all European countries besides Germany. I also had buyers from Russia, Japan, Brazil, etc.
Fighting back the chargebacks
To counter this chargeback risk, I decided to mail out the actual physical gift cards too. The weird thing was that I had buyers from the USA, which made no sense. For them, they can easily go out to any store and pay $100 instead of $109.50. I asked a customer once and he said it was because he could pay using Paypal (which I guess made some sense back then.) There were chargebacks from US based customers too, so I decided to mail out the physical card to all USA based customers. That mailing cost me $1.69, and I could print labels from ebay. I would rather pay that amount than risk losing $80 on a chargeback. Think of it as “insurance.”
For international customers though, it was pretty expensive to print from ebay. Thus, I went to the post office to mail out a couple. It cost $1.15 + $1.30 for a ‘certificate of mailing.’ I don’t remember exactly, but there was a dispute and I believe I lost even though I had the certificate of mailing proof. Either way, going to USPS every other day was NOT AN OPTION. I later found out that Auctiva could print mailing labels and show proof of shipment for $1.15, and those won Paypal disputes! Therefore, if it was a German customers, I wouldn’t mail any physical card. If it was from Russia, Lithuania, or any country that I had done no business from before, I’d pay the $1.15 as “insurance” against chargebacks.
Screwing over Paypal
Eventually, I outsmarted the scammers. Every time I got a Paypal dispute email, I went ahead and redeemed the iTunes gift card to my own iTunes account. You have to think from the scammers POV; they have a hacked Paypal account. They’ll buy the iTunes card and then try to find a buyer for the iTunes card. If I redeemed the code before they could resell it, that means I’m technically out nothing since I spend $80 for a $100 iTunes account. And to sweeten the deal, because I would win the Paypal dispute, now I would still make my ~25% profit PLUS THE $100 ITUNES CARD. It was literally FREE MONEY. Eventually, I realized I loved the scammers since Paypal was the one eating the loss.
I eventually got to the point where I could smell a fake transaction a mile away. I wouldn’t email out the code right away, but I would print out a piece of paper that said, “I believe your Paypal account got hacked. If not, contact me for the iTunes code.” I would then mail this for $1.15. Sure enough, 2 or 3 days later, I’d get the Paypal chargeback email. Now I sent nothing and “made” $109.50. Thanks scammer and thank you Paypal for your shitty fraud detection system.
Apple Chargebacks
Sometimes though, I’d get a scammer or two who would redeem the gift card, and then file a chargeback against me. I started to then file claims with Apple support. As long as I showed proof of the gift card and receipt, I won and they would send me a new gift card code. This worked the first couple of times, but then they started asking great questions like, “If you bought this gift card in Washington, then why was the card redeemed in Australia?” I didn’t want to tell them I resold the gift card. Eventually they stopped sending me new codes. Oh well.
Best Buy banned me
Business was going great for a while. So great that eventually BestBuy.com banned me for ‘purchase limits.’ That meant I could only buy the cards in-store. I also wanted to wait for the 20% off sales to maximize my margins. What eventually happened was Best Buy stopped selling the cards at a 20% discount. I literally ran out of inventory and shut down operations.
Conclusion
Can someone do this today? Sure! All those GC churners had nothing on this ‘scheme.’ Their 2-3% margin can’t top the ~25% margin I was making on iTunes cards. Heck, even reselling can’t reach this at times. Why don’t I restart it today? Well a) my Ebay account is banned and b) I think sourcing is still an issue. Sure, you can buy them at a 10% discount and still make the 10% margin… I’ve just been too lazy to get back into it.
Hi , could you please tell about the error “contact iTunes support to complete this transaction ” while purchasing the gift card certificate from ITunes Store.
I am reselling iTunes gift card on ebay india. Here in india, we can only buy iTunes digitally.
But this error cropping up. I had contacted Apple many times and they able to fix it but last time when i contacted them they Disabled my apple id reason: policy violation. I called apple and they fix my Apple id. And after few days , got the same error. Now I’m afraid for Contacting Apple again. Please help
I’m not sure what is causing that. Sorry.
Thanks for the reply,
Is there any limit to send iTunes gift card digitally from iTunes Store .
Please tell me your case. Have you bought any iTunes gift card from iTunes Store digitally ( email ) ? If yes then how much total value in $ per week
Hey Vinhlo, I just stumbled upon your article as I am currently experiencing the same problem right now but this is just my first few days selling. I tried to send a parcel to the scam buyer but it’ll cost me $20 to send to the UK! How exactly did you get shipping for $1??
Auctiva. This was years ago; not sure what price is these days.
I love this story. It’s a great example of why this is first and foremost a game. You have to want to play, and play to win.
What do you think you netted?
I know what I netted, but I don’t want to say since the Cardinals are always watching.
Fair enough! Just curious.
Great story Vinh. Do you think it is worth it to pay for Auctiva just to win the fight against the scammers?
Would you bet $1 to win $110 with the odds of winning at 50%?
indeed, great story, thanks! this is why we love your blog vinh.
anyways, how exactly did you outsmart paypal and the scammers? you said you would redeem the itunes GC to your own acct as soon as you got a chargeback notification… but at $100 a pop, and doing that a few times, you’d end up with thousands of $$$ worth of itunes credit – so what exactly would you do with that? seems like a sunk cost that you’re stuck with. presumably you didnt have that much use for it on a personal, day to day basis either.
on top of that, after redeeming the GC yourself, you said you would still win paypal disputes… is it because you had mailed out the code too? and in this case even tho the buyer ‘lost’ they would not be out of pocket anything, and PP would pretty much end up paying you for the sale anyways? that’s pretty awesome. dunno why you’d wanna ban all of EU cept GER in retrospect now lol. you shoulda just exclusively sold to scammers haha.
so I’m curious what did you tell apple when they asked you why the GC was redeemed on the other side of the planet? lol or did you just not even bother answering em.
1) Yes, I now have something like $800 in my iTunes account. I have an Apple TV2 that I pay my Netflix subscription through my iTunes account, so I have Netflix for like 8 years. Haha.
2) I’d win Paypal disputes since I shipped something out (in my case, a piece of paper.) The buyer gets their money back. Paypal pays me since I only needed to show proof of shipment. If someone disputed ‘not as described,’ I’d lose that but no one ever did that. So the math goes like this – I pay $80 for a $100 itunes card. Scammer buys it. I ship out piece of paper. I get chargeback. I redeem the $100 itunes card. I win chargeback and get $109.50, so my net is a profit of ~$25 PLUS $100 ITUNES CREDIT.
3) I told Apple, “I don’t know how that happened,” and hence they put a stop to that real quick.
oh I figured they filed the chargeback as ‘item not described’ I mean the actual scammers. but I’m guessing the ones filing it were the original acct owners… so they would just file it as hacked acct? … it seems like in this case the scammers got nothing out of it cept maybe a piece of worthless paper (unless that too was shipped to the actual owners address) – I’m surprised the actual scammers didnt ‘counter’ to try and get something out of the transaction… cause I dont think paypal would pay the scammer (buyer) back considering they had hacked someones acct for this purchase.
or maybe I’m not understanding how/why paypal pays the buyer back even though they lost and YOU (the seller) ‘won’ the chargeback dispute? doesnt make sense.
also why continue to use paypal as your payment processor since they seem to be all over the place. I know there are other e-commerce services out there that you could have used on your site. but not sure if they work on similar principle in these dispute cases as paypal too. otoh, perhaps others have lower transaction fees.
lastly, looks like this gig is kinda up. just casually checked ebay and most cards are going for face value or below face value. so unless these buyers are getting a huge discount/are authorized resellers, doesnt seem like its worth it esp after fees. funny thing is paypal digital GC is sellin these too, at face value.
Sorry for late reply BW. This went into my spam so didn’t see it. Let me address.
1) The scammers would never file a chargeback. Why waste the time when you know you’re in the wrong? Just move on to the next account and next iTunes card. Some did threaten me over Ebay messaging like, “Where is my code? I payed and you have sent no code.” I intentionally screwed up the grammer since that’s how you know it’s a scammer. If these guys ever corrected their English, we’d all be screwed!
2) Therefore, the actual owner got screwed and filed a chargeback with Paypal. I would win since I sent something out (piece of paper). I don’t actually know if they would get their money back. Many times they would then file a SECOND CHARGEBACK, but this time through their credit card. I would win a second time. Where is DOUBLE JEOPARDY when you need it? Actually, I might lose, but Paypal still would cover me since I followed their rules (by shipping the piece of paper). Idiots.
3) I used Paypal since almost everyone uses them, and I know how to bend the rules in my favor.
interesting! I woulda never thought paypal would get involved in a CC chargeback, you’d think they’d just wash their hands off of it. and say “this is out of our realm, you guys sort it out.” so that’s cool, even if the CC company screwed you, paypal would cover you.
but I’m guessing the 2nd chargeback was done using paypal’s interface as well and not thru the bank’s interface? is that why paypal would get involved a 2nd time because they were in the loop even as intermediaries and had to respond?
it would be crazy if you won the first dispute with paypal and then they came the 2nd time around and said nah, you lose this time cause of the CC/bank for the same case LOL.
great story, you definitely took it further then I did, I just detested arguing with Ebay/Paypal everytime there was a charge back. It took too much time lol.
I think by the end, I didn’t even have to dispute the chargeback since Auctiva linked to Ebay, so Paypal knew I had proof of shipment already. Worst case, I logged on and put in the proof of shipment code. The buyer never countered cuz they were a scammer. I had everything down to a science and an art (to detect the scammers).
I’ve considered this too, but the fraud potential scared me off. I’ve also noticed that some gas cards sell for above face value – just people trying (and failing miserably) to hedge against rising gas prices?
Yea but as you can see, I outsmarted and even welcomed the scammers.
Any idea what BBY’s purchasing limit is?
No clue. They eventually unbanned me after months. Then I bought too many clearance items and they banned me again. I don’t know why they were turning away business. Idiots.