Can You Buy a Gift Card With a Credit Card?

It is often possible to purchase gift cards using a credit card, though this practice involves various considerations. Consumers should understand the financial implications and specific rules that apply. The ability to use a credit card for gift card purchases is not universally consistent, depending on the gift card type, credit card issuer policies, and retailer regulations.

The Ability to Purchase Gift Cards

Purchasing gift cards with a credit card is generally allowed in many retail environments. This applies to both physical stores and online platforms. The feasibility of such a transaction, however, often depends on the specific type of gift card being purchased.

There are two primary categories of gift cards: closed-loop and open-loop. Closed-loop gift cards are redeemable only at a specific merchant or a group of affiliated merchants, such as a particular clothing store or restaurant chain. These are typically treated similarly to other retail purchases. In contrast, open-loop gift cards, like those bearing the Visa, Mastercard, or American Express logos, function more like prepaid debit cards and can be used wherever the respective card network is accepted. These often incur activation or purchase fees, typically ranging from $2.95 to $6.95, which are added to the card’s face value.

Credit Card Processing of Gift Card Transactions

When using a credit card to buy gift cards, the transaction is usually processed as a standard purchase. This means it falls under the credit card’s regular Annual Percentage Rate (APR) and is typically eligible for any rewards programs associated with the card. However, there is a possibility that some credit card issuers may classify gift card purchases, especially large or frequent ones, as a “cash advance.” A cash advance is essentially a short-term loan against your credit limit, and it carries significant financial downsides.

Cash advances typically come with higher fees and immediate interest accrual without a grace period. Fees for cash advances often range from 3% to 5% of the transaction amount, or a flat fee, usually around $10, whichever is greater. Interest on cash advances begins accruing from the transaction date, at a higher APR, which can be around 27% or more, unlike standard purchases that may offer an interest-free grace period if the balance is paid in full. Some credit card rewards programs exclude cash advances, and occasionally gift card purchases, from earning points or cash back. Violating these terms could lead to rewards being clawed back or account closure.

The purchase of gift cards also impacts a cardholder’s credit utilization ratio, which is the amount of credit being used compared to the total available credit. This ratio is a significant factor in credit scoring models, accounting for up to 30% of a FICO score. Large gift card purchases can temporarily increase this ratio, potentially signaling higher risk to lenders and negatively affecting credit scores. Maintaining a credit utilization ratio below 30% across all revolving accounts is generally advisable for a healthy credit profile.

Retailer Policies and Purchase Limitations

Beyond the credit card issuer’s policies, retailers also impose specific rules and limitations on gift card purchases made with credit cards. These policies can vary significantly from one store to another and may differ between in-store and online transactions. Some retailers might not accept credit cards for gift card purchases at all, particularly for open-loop cards, due to concerns about fraud and money laundering.

Retailers often implement daily or per-transaction limits on the amount of gift cards that can be purchased with a credit card. For instance, a store might limit the total value of gift cards bought in a single transaction or within a 24-hour period. These restrictions are often influenced by anti-money laundering regulations, leading some retailers to cap single gift card values or total purchase amounts.

It is common for retailers to require alternative payment methods, such as cash or debit, for higher-value gift card purchases or for certain types of gift cards. Consumers should always confirm the specific policies with the retailer before attempting to purchase gift cards with a credit card, especially for substantial amounts, to avoid unexpected transaction denials or issues at the point of sale.