Can You Buy a Gift Card With a Gift Card?

Gift cards have become a popular and convenient way to give gifts, offering recipients the flexibility to choose what they want. Many people receive gift cards for various retailers or general payment networks. A common question arises for those who find themselves with an unwanted gift card or a small balance: is it possible to purchase a new gift card using an existing one?

The General Policy

For most retailers and across the gift card industry, the general policy prohibits purchasing a gift card with another gift card. This rule is widely enforced, meaning customers typically cannot use a store-specific gift card to buy another gift card from the same store, nor can they use it to purchase a gift card for a different retailer. Similarly, while open-loop gift cards, like those from Visa or Mastercard, function broadly like debit cards, many retailers still prevent their use for purchasing other gift cards. Point-of-sale systems are often programmed to automatically decline such transactions, whether attempted online or in person.

Reasons for the Policy

Retailers implement this restriction primarily to mitigate financial risks and prevent illicit activities. A significant concern is fraud prevention, as allowing gift card purchases with other gift cards could facilitate money laundering schemes. Criminals might use stolen credit cards to buy gift cards, then convert those into other gift cards, making the funds harder to trace and effectively “washing” the money. This practice also helps combat other forms of fraud, such as using gift cards obtained through fraudulent returns to acquire new, untraceable gift cards. The Federal Trade Commission (FTC) frequently warns consumers about scams demanding gift card payment, highlighting their untraceable nature.

Another reason involves breakage, which refers to the value of gift cards that are sold but never fully redeemed by customers. Retailers recognize this unredeemed value as income, contributing to their revenue. Allowing gift cards to be used to purchase other gift cards could reduce this breakage revenue by enabling consumers to consolidate small balances or potentially extend expiration dates, reducing the likelihood of unspent value.

The prohibition also simplifies tracking and accounting for retailers. When a gift card is sold, the transaction is recorded as a liability, not immediate revenue, because the retailer owes goods or services in the future. Revenue is only recognized when the card is redeemed for a purchase. Allowing complex gift card-for-gift card transactions would introduce significant accounting complexities, making it more challenging to track liabilities, recognize revenue accurately, and manage the financial implications.

Distinctions and Exceptions

Understanding the different types of gift cards is helpful when considering these policies. Closed-loop gift cards are specific to a single retailer or a limited group of affiliated stores. These cards are subject to the strict “no gift card for gift card” policy. Conversely, open-loop gift cards, often branded with logos like Visa or Mastercard, function more like prepaid debit cards and are accepted wherever the associated payment network is honored. While open-loop cards offer greater flexibility and can be used to purchase merchandise, even these widely accepted cards are often restricted from buying other gift cards due to the same fraud prevention measures applied by retailers.

Another distinction exists between traditional gift cards and store credit. Store credit is issued for merchandise returns without a receipt or as part of a loyalty program. Unlike gift cards, which are considered a form of payment and are subject to consumer protection regulations, store credit is often less regulated and may have more restrictive terms. While store credit can be used more flexibly within the issuing store, its use for purchasing new gift cards is also prohibited and varies based on the individual retailer’s specific policies.

Using Unwanted Gift Cards

Since purchasing a new gift card with an existing one is not permitted, consumers with unwanted gift cards or small remaining balances have several alternative options. The most direct approach is to use the gift card for its intended purpose by purchasing goods or services from the issuing retailer. This ensures the full value of the card is utilized. Even if the card is for a store not frequently visited, it can be used to buy items that can serve as gifts for others, effectively converting the gift card’s value into a usable present.

For those who prefer not to shop at the specific retailer, online gift card marketplaces offer a way to sell or trade unwanted cards. Platforms like CardCash and Raise allow users to list their gift cards for sale, though they receive less than the face value. Some platforms also facilitate trading one gift card for another, providing an opportunity to acquire a card for a more preferred retailer.

Donating an unwanted gift card to a charity is another option. Many non-profit organizations accept gift card donations, which they can then use to purchase supplies or convert into funds for their programs. Finally, for cards from the same retailer with small remaining balances, some stores may allow customers to consolidate these amounts onto a single new card, making it easier to fully redeem the value.