Can I Use a Gift Card to Buy Another Gift Card?

Gift cards have become a popular payment method and a common gifting choice, offering flexibility and convenience. Many consumers, however, often wonder about their usage, particularly whether one gift card can be used to purchase another. This question arises as individuals seek to maximize the utility of their gift cards or consolidate small balances.

The Standard Practice

The general policy across most retailers and gift card issuers is that you cannot use a gift card to buy another gift card. This prohibition applies to both store-branded gift cards, redeemable only at that specific retailer, and third-party gift cards sold at general merchandise retailers. This widely adopted policy is a common industry standard, though specific exceptions can occasionally exist depending on an individual store’s discretion.

Why Restrictions Exist

Several factors contribute to the widespread prohibition against using one gift card to purchase another. These reasons primarily revolve around preventing fraudulent activities, managing complex accounting procedures, and protecting profit margins for retailers.

One significant reason is fraud prevention. Gift cards can be exploited for money laundering, where illicit funds are converted into gift cards to obscure their origin, making them harder to trace. Criminals might also use stolen credit cards to purchase gift cards and then convert those gift cards into cash or other goods, effectively “cashing out” their fraudulent gains. Allowing gift cards to purchase other gift cards would create an easy pathway for these types of illicit financial activities, as gift card transactions often offer a degree of anonymity. Retailers implement these restrictions to mitigate risks associated with untraceable transactions and to comply with anti-money laundering efforts.

Another reason involves the complexities of accounting and financial tracking. When a gift card is sold, it is recorded as a liability on the retailer’s balance sheet, meaning the retailer has received cash but has an obligation to provide goods or services later. Revenue is only recognized when the gift card is redeemed. Allowing the purchase of one gift card with another would complicate this accounting treatment, as it involves exchanging one form of liability for another without a direct sale of goods or services, making financial tracking more intricate.

Retailers also consider their profit margins. Businesses benefit from “breakage,” which is the value of gift cards that are sold but never redeemed. Breakage can represent a notable source of revenue for retailers. If consumers could perpetually exchange gift cards, it could diminish the potential for breakage and impact the overall profitability of gift card programs.

Navigating Different Scenarios

While the general rule prohibits using one gift card to buy another, it is helpful to understand related scenarios that operate under different principles. These distinctions clarify what is typically allowed versus what remains restricted.

Store credit is distinct from a gift card, even if issued on a similar-looking card. Store credit is often provided for returns without a receipt or as part of a loyalty program. Unlike gift cards, store credit may have more restrictive terms set by the retailer, such as expiration dates or limitations on what can be purchased. While usable for purchases, store credit is generally not usable for buying other gift cards.

Third-party gift card exchange kiosks and websites offer an avenue for managing unwanted gift cards. These platforms allow consumers to sell or trade their gift cards for cash or different gift cards, often at a discounted rate. These services operate outside the traditional retail environment, facilitating transactions between the cardholder and the platform, rather than direct purchases from a retailer. Consumers typically receive a percentage of the card’s face value, ranging from 60% to over 90%, depending on the platform and the card’s brand.

Most retailers prohibit using a gift card to buy another. Rare exceptions may exist, specific to individual store policies. Always consult a retailer’s policy or customer service, as any deviation from the standard prohibition would be explicitly stated. Even open-loop gift cards, like those from Visa or Mastercard, which function more like debit cards, may face restrictions when purchasing other gift cards.

Maximizing Gift Card Value

Since direct gift card-to-gift card purchases are generally not permitted, consumers can explore several alternative strategies to make the most of their existing gift cards. These approaches help ensure the card’s value is utilized effectively.

Use for Intended Purpose: The primary purpose of a gift card is to purchase goods or services from the issuing retailer. Using the card for its intended purpose ensures the full value is realized.
Regift Unwanted Cards: If a gift card is for a retailer you don’t frequent or have no immediate use for, regifting it to someone who would find it valuable is a practical option. This allows the card’s value to be fully appreciated by a new recipient, preventing it from going unused.
Exchange Unwanted Cards: For unwanted gift cards, exploring reputable online platforms or physical kiosks that specialize in gift card exchange can convert the card into cash or a different, more desirable gift card. While these services typically offer less than the card’s face value, they provide a way to recover some value.
Consolidate Cards: Some retailers may offer services to consolidate multiple small-value gift cards into a single, larger card for convenience. This is generally limited to their own branded gift cards and is a different process than purchasing a new gift card with an existing one. Check with the specific retailer’s customer service or review their gift card terms and conditions to clarify if this option is available.