Can I Get My Money Back From a Gift Card?

Gift cards are prepaid stored-value cards, offering a convenient way to give or receive funds for future purchases. While widely popular, a common question arises regarding the ability to convert these cards back into cash. Retrieving a gift card’s monetary value is not always straightforward, as policies and regulations vary. However, specific circumstances and methods allow converting a gift card’s value into cash or an equivalent benefit.

Understanding Gift Card Types and Policies

Gift cards fall into two main categories, each with distinct characteristics affecting their use and cash redemption. Open-loop gift cards, branded with a payment network logo like Visa or Mastercard, can be used wherever that network is accepted. These cards resemble debit or credit cards, allowing broad spending flexibility across merchants. However, they are not directly convertible to cash by the issuing bank or payment network.

Closed-loop gift cards are issued by specific retailers or restaurants, redeemable only at that merchant. Examples include cards from a coffee shop or department store, restricting spending to their locations or websites. These store-specific cards usually come with “no cash value” clauses.

Federal regulations, like the Credit CARD Act of 2009, provide consumer protections for gift cards. This legislation dictates that most gift cards cannot expire earlier than five years from issuance or the last time funds were added. Dormancy, inactivity, or service fees can only be charged if the card has been inactive for at least one year. Review the card’s terms and conditions to understand any limitations or fees.

Legal Rights to Cash Back

While federal law addresses expiration dates and fees, the right to convert a gift card to cash is largely determined by jurisdictional laws. Federal statutes do not mandate that merchants provide cash back for gift cards. Instead, some jurisdictions require retailers to offer cash redemption under specific conditions, typically when the balance falls below a small, predetermined threshold.

These laws vary by jurisdiction, but a common provision allows consumers to request cash for balances below a low amount, often $5 or $10. For instance, if a gift card has a balance of $4.50 and the applicable law sets the threshold at $5, the cardholder may have the legal right to receive that $4.50 in cash from the merchant. This applies to both open-loop and closed-loop cards in those areas.

To exercise these rights, individuals need to present the gift card to the merchant. Be aware of the specific regulations in the relevant jurisdiction before making such a request.

Alternative Ways to Convert Gift Cards to Cash

When direct legal cash redemption is not an option, alternative strategies exist for converting gift card value into usable funds or benefits. One common method involves online gift card resale marketplaces, which allow individuals to sell unwanted cards for a percentage of their face value. Platforms like CardCash or Raise connect sellers with buyers looking for discounted gift cards.

The process involves listing the card on the platform, receiving an offer based on its brand and demand, and completing the transaction. Payouts from these marketplaces range from 70% to 90% of the card’s face value, with funds often disbursed via PayPal or direct deposit. While not a full cash return, this method provides a reliable way to recover a substantial portion of the card’s value.

Another approach is peer-to-peer sales, directly selling the gift card to friends, family, or through local online marketplaces. This method can yield a higher percentage of the card’s face value, as there are no platform fees or intermediary deductions. However, direct sales carry risks, such as potential scams or difficulties in verifying the card’s balance and authenticity before the exchange.

An indirect but effective way to convert gift card value is using the card for essential purchases that would otherwise require cash. Using a gift card for groceries, gasoline, or certain utility bills if accepted, frees up cash that would have been spent on these necessities for other uses. This strategy frees up personal funds, providing a financial benefit equivalent to receiving cash. Gift cards can also be donated to charitable organizations, allowing the donor to claim a tax deduction for the fair market value of the donation.

What Happens If the Issuer Goes Out of Business

A concern for gift card holders is the fate of their card’s value if the issuing company ceases operations. If a company goes out of business or declares bankruptcy, its gift cards can become worthless. This is because the company can no longer honor the outstanding value represented by the cards.

In bankruptcy proceedings, gift card holders are categorized as unsecured creditors. They are among the lowest priority for repayment, behind secured creditors, employees, and tax authorities. While it is possible for a gift card holder to file a claim in bankruptcy court, the chances of recovering the full value, or even a substantial portion, are very low. Any recovery, if it occurs, might be a small fraction of the card’s value, and the process can be lengthy and complex.

To mitigate the risk of losing funds due to an issuer’s financial distress, use gift cards promptly after receiving them. Holding onto gift cards for extended periods, particularly from smaller or less stable businesses, increases the exposure to the possibility that the issuer may no longer honor the card’s value.