Can You Buy a Gift Card With a Credit Card?

Consumers often consider using credit cards for various purchases, including gift cards. This approach offers convenience and potential benefits, but involves specific considerations regarding how transactions are processed by credit card issuers. Understanding these nuances is important for making informed financial decisions.

Purchasing Gift Cards with Credit Cards

In most retail and online environments, it is generally possible to purchase gift cards using a credit card. Consumers frequently buy gift cards at major retailers, grocery stores, and online marketplaces. Many digital gift cards can also be acquired online with a credit card and delivered electronically.

This method offers a convenient way to manage gift-giving expenses or to pre-load funds for personal use. While many merchants accept credit cards for gift card transactions, some smaller retailers or specific vendors might have their own restrictions.

Credit Card Terms and Transaction Classification

While purchasing a gift card with a credit card is often permitted, the issuer’s classification of the transaction is a key factor. Transactions are typically categorized as either a standard purchase or a cash advance. This distinction significantly impacts the costs and terms associated with the transaction.

If a gift card purchase is classified as a cash advance, it incurs immediate interest charges without a grace period. Cash advances also carry a higher Annual Percentage Rate (APR) compared to standard purchases. Additionally, a cash advance fee, ranging from $5 to 5% of the transaction amount, is usually applied.

These charges mean that a gift card purchase coded as a cash advance will be significantly more expensive than a regular purchase. Consumers should review their credit card agreement or contact their issuer directly to understand specific policies regarding gift card transactions. Rewards programs can also be affected. While many purchases earn points or cash back, some issuers exclude gift card purchases from earning rewards. Issuers may also claw back rewards if they suspect an attempt to “manufacture spending” or exploit the rewards system.

Types of Gift Cards and Purchase Considerations

Gift cards generally fall into two main categories: closed-loop and open-loop. Closed-loop gift cards are specific to a single retailer or brand, usable only at the issuing store or chain. Examples include gift cards for a particular clothing store or restaurant.

Open-loop gift cards, by contrast, are branded by major payment networks such as Visa, Mastercard, or American Express. These cards function similarly to debit or credit cards and can be used almost anywhere the respective payment network is accepted. Their resemblance to cash can lead to different treatment by credit card issuers.

Purchases of closed-loop gift cards are less likely to be classified as cash advances by credit card issuers. However, open-loop gift cards, especially for large amounts, may be viewed more cautiously due to their cash-like nature. These general-purpose gift cards often come with activation fees, ranging from $2.95 to $6.95, paid by the purchaser at acquisition.