Can I Get Cash Back From a Gift Card?

Many people wonder if they can convert gift cards into cash, especially when holding balances they don’t plan to use. While gift cards are primarily for purchasing goods or services, not monetary instruments, specific circumstances and methods allow for cash redemption. Understanding limitations, state-specific regulations, and alternative strategies can help cardholders make informed decisions about unused gift card balances.

General Restrictions on Cash Back

Most gift cards are issued with terms and conditions stating they are not redeemable for cash. This is because gift cards function as a form of store credit or a prepaid payment method for future purchases, rather than as legal tender. When a gift card is sold, the issuer recognizes the amount as a liability or unearned revenue on their balance sheet, as the service or good has not yet been provided. Revenue is only recognized when the card is redeemed for a purchase.

The intent behind most gift cards is to encourage future spending at a particular merchant, not to provide a cash equivalent. Therefore, direct cash back is generally prohibited unless a specific legal requirement mandates it. This default position often surprises consumers, who might view a gift card as equivalent to cash.

State-Specific Cash Back Laws

Despite general restrictions, several states have enacted laws requiring merchants to provide cash back for gift cards under specific conditions. These laws primarily aim to protect consumers from losing small, unused balances that might otherwise go unspent. Cash redemption thresholds vary significantly by state. For example, California allows cash redemption for any gift card balance less than $10.

Other states have different limits:
Colorado, Maine, Montana, New Jersey, Oregon, and Washington allow redemption for balances less than $5.
Rhode Island and Vermont permit cash back for balances under $1.
Massachusetts allows cash redemption if 10% of the original value remains and the card cannot be reloaded.

To request cash back, cardholders typically present the gift card directly to the merchant. Some businesses may also require identification or have a specific process, such as contacting customer service or visiting a physical store. These state laws generally apply to store-specific gift cards and usually exclude open-loop cards, such as those issued by Visa or Mastercard.

Alternative Ways to Use Gift Card Value

If direct cash redemption is not available, several alternative methods can help extract value.

Use for Routine Purchases: Use the card for groceries, gasoline, or household necessities. This effectively converts the gift card value into cash saved on essential expenses. Even small balances can be depleted over time through multiple small transactions.
Sell Online: Sell the gift card on online marketplaces or specialized gift card exchange websites. These platforms connect sellers with buyers looking for discounted gift cards. While this method provides cash, sellers should be aware that a percentage of the card’s value, typically ranging from 5% to 20%, may be forfeited as a fee or discount to attract buyers. The exact amount received can depend on the popularity of the merchant and the remaining balance.
Trade with Others: Trade gift cards with friends or family members who can use them. This informal exchange can result in receiving cash directly from them or trading for a more useful gift card.
Donate to Charity: Donating unused gift cards to charitable organizations is an option, which can provide a tax deduction for the donor while benefiting the charity. Donors should ensure such contributions follow IRS guidelines.
Combine Payments: For small, residual balances, some online retailers allow combining gift card funds with other payment methods. This makes it easier to fully utilize the card, especially for balances too small for a full purchase.

Exploring these various avenues ensures that the value of an unused gift card is not lost, even if direct cash redemption is not possible.