Why Grading Low Value Cards is a Losing Strategy

A clear framework explaining why it's best to grade cards worth $70 or more

If you’ve ever looked through eBay, you’ll know there are hundreds of thousands of cards listed for sale at any given time, with tons of them listed at lower price points. With so many cards out there, it’s very important to have a strategy to find the ones that you want to buy. For the sake of saving time (and money), it is best to ignore low value cards when looking for grading candidates. This post will provide a framework to understand why this is true.

We’re going to go through 3 examples, all with the same gem rates and multiples. You’ll see that because of the fixed costs of grading, lower value cards have significantly lower profitability than higher value cards, even when gem rates and multiples are exactly the same.

We’re also going to make a couple of important assumptions to make the Expected Value calculations easy.

1. Assume 13% selling fees for all cards. This is pretty standard for eBay sales.

2. Assume $35 grading cost per card:

   • Value Level PSA submissions cost $28.

   • We’ll assume $7 for round-trip shipping. Note that this probably will be higher for you if you’re not submitting cards in bulk.

   • The maximum assessed value for PSA Value submissions is $500. This means none of the example cards are at risk of an upcharge.

I’m going to keep the math for the example cards quick. Example 1 will show the full math, while Examples 2 and 3 will just show the results. You can find a full guide to Expected Value here.

The Example Cards

Here we’re going to look at three examples to illustrate the points made above. Each example card will cost more than the previous one, while gem rates and multiples are kept constant. You’ll quickly see that the most valuable cards are also the most profitable. Let’s start with Example 1.

Example 1:

Market Values

• PSA 10 Value: $150

• PSA 9 Value: $75

• Ungraded Value: $75

Expected Profitability

• Gem Rate: 60%

• Expected Value After Costs: ($150 x 60% + $75 x 40%) x 87% - $35 = $69

• Expected Profit: $69 - $75 = -$6

I think it’s clear that you wouldn’t want to buy and grade this card, but let’s take a second to think about why. If you read our Guide to Gem Rates and Multiples post, you’ll know that a card with a 60% gem rate and 2x multiple is actually quite often profitable. However, the problem in this case is that the cost of grading this card is very high relative to the value of the card.

Remember, grading costs are fixed at $35, which isn’t a big deal if you’re grading a $400 card. But for this example card, you are paying 23% of the potential PSA 10 value or 47% of the potential PSA 9 value in grading costs. This leaves no space for consistent profit.

Let’s move on to Example 2 now, which doubles the value of the card in Example 1.

Example 2:

Market Values

• PSA 10 Value: $300

• PSA 9 Value: $150

• Ungraded Value: $150

Expected Profitability

• Gem Rate: 60%

• Expected Value After Costs: $173

• Expected Profit: $23

You’ll see that Expected Profitability is a bit better here, but still pretty low. However, this is better than Example 1 because the fixed grading costs make up a smaller percentage of the card’s value, and thus leaves more room for profit.

The cost of grading is just 12% of the card’s PSA 10 value or 23% of the card’s PSA 9 value.

Let’s now look at Example 3, which is triple the value of the card in Example 1.

Example 3:

Market Values

• PSA 10 Value: $450

• PSA 9 Value: $225

• Ungraded Value: $225

Expected Profitability

• Gem Rate: 60%

• Expected Value: $278

• Expected Profit: $53

As you can see, this is the most profitable of the 3 example cards, and the only one that I would personally consider buying. The reason for this is that the grading cost is small compared to the value of the card.

The cost of grading is just 8% of the card’s PSA 10 value or 16% of the card’s PSA 9 value. This leaves space for solid profitability.

How This Affects Grading Strategy

The examples above do a good job at demonstrating why we rarely buy cards worth less than $70. They are usually not profitable, and in general, Expected Profit and Expected Return on Investment both increase as you look at more expensive cards. For this reason, cards worth $200+ are our sweet spot.

This is also why we aim to invest in abundant, high-value cards. Being abundant is important, because you need to find cards that are PSA 10 contenders (more on finding PSA 10 contenders here and here). And being high value is important because (as we’ve discussed) this drives profitability.

For example, when it comes to baseball cards we specifically like the Bowman Chrome Prospect Autos and the Topps Chrome Rookie Autos for these reasons.

As you develop your own grading strategy, keep this framework in mind. Understanding how fixed costs impact profitability will save you time and money. And when you see future posts about which specific cards we’re targeting, you’ll understand why we focus where we do.