Can I Buy a Gift Card With a Gift Card?

Many consumers wonder if a gift card can be used to purchase another. This question often arises when individuals receive a gift card for a store they do not frequent or wish to consolidate small balances. While the concept seems straightforward, the answer is generally “no,” though specific situations exist.

The General Rule Against Gift Card Purchases

Most retailers and financial institutions prohibit purchasing one gift card with another. This policy primarily serves as a fraud prevention measure. Criminals often exploit gift cards for illicit activities like money laundering, converting fraudulently obtained funds into gift cards to obscure their origin. Allowing gift cards to be used for purchasing others would make tracing illicit funds significantly harder.

Retailers also implement these restrictions due to accounting complexities. When a gift card is sold, the retailer records the amount as a liability, representing unearned revenue until redeemed. Allowing the purchase of another gift card with an existing one would complicate this accounting, creating nested liabilities that are difficult to track. Prohibiting such transactions also helps retailers protect profit margins by preventing consumers from exploiting promotional offers, such as buying a discounted gift card and then using it to acquire another at full value.

How Card Types Influence Transactions

The ability to purchase one gift card with another is influenced by the card type. Gift cards fall into two main categories: closed-loop and open-loop. Closed-loop gift cards are specific to a single merchant or a limited group of affiliated businesses, such as a clothing store or restaurant chain. These cards are almost universally restricted from being used to purchase other gift cards, even for the same store, due to their design for direct redemption within that retail ecosystem.

Open-loop gift cards are network-branded, resembling debit or credit cards, and are issued by financial institutions like Visa, Mastercard, or American Express. These cards offer broader acceptance wherever the respective payment network is honored. While open-loop cards function more like traditional payment methods, they often still face restrictions when attempting to purchase other gift cards. This limitation is primarily due to the same fraud prevention concerns that apply to closed-loop cards, as their cash-like nature makes them attractive for illicit activities.

Specific Situations Where It May Be Permitted

While the general rule is restrictive, rare circumstances may allow purchasing a gift card with another. These exceptions are typically at the sole discretion of individual retailers and are not widespread practices. Some retailers might permit using their own branded gift card to purchase another for the same store, though this is uncommon and usually does not extend to buying third-party gift cards.

In limited instances, particularly with open-loop gift cards, a retailer might allow their use to purchase a store-branded gift card. This flexibility often depends on the specific point-of-sale system and the retailer’s internal policies, which can vary. Consumers should always verify the store’s current policy directly with a cashier or through their official website, as these situations are exceptions and may come with specific conditions.

Managing Unwanted Gift Cards

For consumers holding gift cards they cannot use to purchase another, several practical alternatives exist to manage value. One common solution is to utilize online gift card exchange platforms, such as CardCash, Raise, or GiftCash. These marketplaces allow individuals to sell unwanted gift cards for cash, typically at a percentage of the card’s face value, or to trade them for gift cards to other preferred retailers.

Another option involves reselling the gift card directly to friends, family, or through local online community groups, often at a slight discount. If the card is a gift, regifting it to someone who would use it is a simple way to ensure the value does not go to waste. Donating the gift card to a charity is also a viable option. Finally, the most direct approach is to simply use the card for its original purpose: purchasing goods or services from the issuing merchant, or stocking up on essentials.