Trade-In Arbitrage: How To Turn Amazon Credit Into Cash

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Three ways to turn Amazon trade-in credit into cash (or turn cash into more cash)

Update: Amazon discontinued it’s textbook trade-in program in 2020. This article remains relevant as a case study in the virtually unlimited ways to creatively make money on Amazon.

What to do once you’ve racked up Amazon trade-in credit?

In previous articles, I’ve covered a lot of ground related to Amazon trade-in credit arbitrage.

Now we’re going into the fun part: What happens after you’ve racked up credit? Go on a spending spree for bathrobes, slippers, and pool toys; or turn it into cash?

(That wasn’t a trick question. Option #1 is totally legitimate.)

Warning: I’m aware trade-in sounds insane

I want to (again) address a question that inspired some outrage in my inbox after my first article in this series:

Why would you trade a book in for credit (or instant cash buyback sites, which we haven’t even talked about yet) when you can sell it for even more cash?

I’m with you. I personally think its WAY better to sell books (and more) for cash. Two things about that:

1. Trade-in mining tactics work for credit AND cash.
2. Trade-in appeals to a certain type of person.

About #2, the trade-in game & instant buyback site game appeals to three types of people:

1. Someone who is extremely risk-averse and wants a nearly-guaranteed outcome.
2. Someone who wants quick results.
3. Some who doesn’t want to bother with the infrastructure of a “real business” (inventory, a seller account, etc)

Amazon trade-in credit arbitrage appeals to a certain kind of risk-averse seller who wants quick results and minimal risk.

Before we tell you how to turn it into cash, there’s another decision you have to make…

Credit compounding or cash out?

So let’s say you follow the formula I outlined in my first article in this series, took $100 in cash and turned it into $120 in Amazon credit. Here are your two options:

1. Cash out: Turn that credit into cash as quickly as possible.
2. Credit compounding: “Trade up” to turn $120 into $150, and on and on.

Credit compounding: How it works

You should be able to extrapolate from the name alone how this works. Credit compounding goes like this:

• Taking a small amount of seed money (say, $100).
• Finding products online cheaper than their trade-in value, buying them, and trading them in.
• Then repeating the process and turning that into even more Amazon trade-in credit.
• And onwards and onwards…

…until you’re ready to cash out.

How far can you take it? Sky is the limit. Remember that margins are small with Amazon trade in credit arbitrage, and hunting down opportunity takes time. But the opportunities are out there and there’s no limit to how far you can “trade up.”

Credit compounding: A simple, conservative math equation

Let’s say for steadily receive only 5% returns for your trade-in credit investments. So for every $100 you invest, you get $105 back.

Here’s how those numbers work:

• Initial investment: $100
• 1st book: $105
• 10th book: 162.89
• 20^th book: 265.33

Again, I went for extremely conservative numbers here, assuming only 5% returns per transaction. Hopefully it will work out a lot for you a lot better than that.

So with 20 trades, you took $100 and turned it into $265 in Amazon credit. It took some time to get there of course, but through the miracle of this kind of “compounded interest,” and using some very conservative math, you got there.

And to make this extra cool, the risk was slim to none. As covered in my “How To Profit From Amazon Trade-In Credit Arbitrage” article last week, Amazon guarantees the price and locks it in, so short of shipping them a damaged or incorrect book, that amount is guaranteed.

Taking this further: A second example, at 10% returns

• Initial investment: $100
• 1st book: $110
• 10th book: 259.37
• 20^th book: 672.75

Those numbers are even better. Much better.

So you’re ready to cash out

At some point, you’re going to decide to stop racking up trade in credit and cash out. How do you do it?

The answer is in one of three forms of online arbitrage – two I’ve talked about before, and one I haven’t.

Credit-to-cash formula #1: Old fashioned “online book arbitrage”

This is the formula I’ve been teaching for over two years. Don’t worry, I’m not going to explain it again. If you’ve read my book Online Book Arbitrage or been on my webinars, you know how this works. The premise is this:

“Buying cheap ‘merchant fulfilled’ (non-Prime-eligible) books, and reselling at a higher FBA (Prime-eligible) price.

Step #1: Set your buying criteria

If you’re doing trade-in credit arbitrage, we already know you’re someone who likes low risk and quick results (in exchange for lower returns), so let’s build our criteria around that assumption.

We’ll be looking for:

1. Textbooks.
2. Higher priced ($20+)
3. High demand (<100,000 rank)
4. Lower ROI: (50%)

It’s very easy to find well-ranked books with 50% returns when we’re willing to spend $20+ per book.

Step #2: Start compounding the cash

• Start: $100 in trade credit.
• Purchase: Four textbooks.
• Expected returns: 50%
• Turnaround time: 30 days.
• Result: $150 cash.

Now I never tell people to expect all their books to sell within 30 days with online book arbitrage. However in this case, we’re focusing on high demand books with low returns. And we’re pricing pretty conservatively, so all that should result in fast turnover.

So we just took $100 in Amazon trade credit (or cash, for that matter) and turned it into $150 in cash in 30 days. Consistent 50% returns are virtually unheard of in any investment anywhere (that I’m aware of), so this is pretty amazing in and of itself. But of course, it gets better…

Let’s roll our proceeds back into more books

• Start: $150 in cash.
• Purchase: Six textbooks.
• Expected returns: 50%
• Turnaround time: 30 days.
• Result: $225 cash

Same (simple) online book arbitrage formula. Now we’re up to $225 in 60 days. Yes, it won’t always work out exactly like this (sometimes better, sometimes worse), but I think this math leans towards conservative.

Let’s do this two more times:

• Start: $225 in cash.
• Purchase: Nine textbooks.
• Expected returns: 50%
• Turnaround time: 30 days.
• Result: $340 cash.

And then:

• Start: $340 in cash.
• Purchase: 12 textbooks.
• Expected returns: 50%
• Turnaround time: 30 days.
• Result: $510 cash.

What just happened?

A: We turned $100 in Amazon trade in credit into $500 in cash in 120 days.

That’s not overnight. But getting a 5x return on investment this quickly is almost unheard of in any other business.

In ancient times you would be burned at the stake for this kind of Merlin-level sorcery. But this isn’t magic.

Credit-to-cash formula #2: The “Underpriced Book Hack”

AKA selling severely mispriced books for quick cash.

The “Underpriced Book Hack” goes like this:

Anytime you can find a book on Amazon that is selling for “close” to the trade in value, that is a strong indicator that book is significantly underpriced by the seller (probably by accident).

Which means it is a strong indicator that book can be purchased at its cheap price, and immediately resold at its “true market price.” And of course, you get to profit the difference.

The premise of this hack is simple: Trade-in value is always less than the true market value of the book. Otherwise, the amount Amazon is offering for a book would be lower.

So your only mission becomes:

1. Cruise around Amazon’s trade in store.
2. Look for items selling for close to their trade in amount (say, within 30%)
3. Confirm the item is underpriced by reviewing the item’s price history in Keepa.
4. Buy the underpriced item.
5. Sell immediately on Amazon for a cash profit.

By all angles, this is quick, low-risk cash.

Running The Numbers On “The Underpriced Book Hack”

Let’s say you take a mere $100 in credit (or cash, doesn’t matter). Using the Underpriced Book Hack, with enough hunting, let’s say you find enough underpriced books to safely turn that into $150, after all Amazon commissions. Possibly leaning towards optimistic here, but these opportunities are not uncommon.

(Each “round” below represents each time you invest the proceeds into books and convert those books into cash).

Initial investment $100 (credit)

• 1^st round: $150 (cash)
• 2^nd round: $225
• 3^rd round: 337.50
• 4^th round: $506.25
• 5^th round: $759.38

In just 5 cycles (buy, list, sell, repeat), you turned $100 in credit into $759

Again, I think these numbers are pretty reasonable. I’m not getting crazy with the unrealistic optimism here. And the only thing this cost you was the time hunting for opportunity on Amazon.

What if we started with $250?

These numbers get crazy, and I don’t blame you if you read this in disbelief. But here’s how the math works:

Initial investment $250 (credit or cash)

• 1^st round: $375 (cash)
• 2^nd round: $562.50
• 3^rd round: $843.75
• 4^th round: $1,265.63
• 5^th round: $1,898.44

Just for fun, let’s do that same math with $500 credit:

Initial investment $500 (credit or cash)

• 1^st round: $750 (cash)
• 2^nd round: $1,125
• 3^rd round: $1,687.50
• 4^th round: $2,531.25
• 5^th round: $3,796.88

That’s the miracle of “compounded arbitrage interest.”

Credit-to-cash formula #3: Book buyback site arbitrage

I’ve never talked about book buy back sites before, mostly for the same reason I rarely talked about Amazon’s trade-in program before last week:

The buy back amount is always going to be less than what you can get for the book by selling it on Amazon.

That said, this is a great formula for the aforementioned “risk averse” person, because just like Amazon’s trade-in program, book buyback programs lock in a price and guarantee it for a set number of days.

Few facts about book buyback sites:

1. There are over 35 of them.
2. They lock in the price and (most) pay in cash.
3. There is huge variation in how they pay, conditions standards, etc etc.
4. They often pay more in cash than Amazon will in credit.

The last one is interesting.

Where do you find book buyback site offers? The best source is BookScouter.com

Enter an ISBN into BookScouter, and it scans over 35 different book buyback sites, and puts the highest offer at the top.

So, you have $100 in Amazon trade in credit. How do you utilize book buyback sites to “trade up” and walk away with significant cash?

By applying the same formula I outlined in my “How To Profit Off Amazon’s Trade-In Program” article. Here’s the general outline:

• Go to Amazon’s trade-in store.
• Look for books with a minimum $25 Amazon trade-in value (the higher the number the more likelihood of the the big price spreads across other sites that we’re looking for).
• Run ISBNs through BookScouter, look for the highest cash buy back offer.
• Run ISBNs through BookFinder.com, and find copies online that are cheaper than the buyback offer.
• Buy at the low price and sell instantly at the high price.

That’s the formula

And that’s how you turn Amazon credit (or cash) into more cash, and on and on until you end up as Scrooge McDuck in a top hat sitting on a giant pile of gold coins.

-Peter Valley

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