Can You Buy a Gift Card With a Gift Card?

Gift cards are a popular and convenient way to give gifts, offering recipients flexibility to choose what they desire. These prepaid cards, loaded with a specific monetary value, are widely used for purchases across various retailers and service providers. A common question for consumers is whether an existing gift card can be used to purchase another gift card. This often arises when individuals receive a gift card for a store they do not frequent, prompting them to explore converting its value into something more useful.

Retailer Policies on Gift Card Purchases

Most retailers prohibit the purchase of a gift card using another gift card. This policy is standard across a broad spectrum of retail sectors, including large department stores, grocery chains, and online marketplaces. Retailers implement this rule by programming their point-of-sale (POS) systems to automatically block such transactions. Attempting this online typically results in an error message, and in-store cashiers are trained to inform customers it is against company policy.

This prohibition applies to both physical and digital gift cards. This consistent application across different formats indicates a unified approach by the retail industry to manage gift card transactions. While policies might vary slightly by individual retailer, the overarching principle remains that gift cards are not accepted as a form of payment for other gift cards.

Reasons for Purchase Restrictions

Retailers impose restrictions on purchasing gift cards with other gift cards primarily due to security and financial regulation concerns. This policy combats various forms of fraud, including money laundering and the illicit use of stolen funds. Allowing such transactions could create an untraceable pathway for converting stolen money into usable gift card balances, making it difficult for authorities to track fraudulent activities.

Gift cards are often treated as cash equivalents, meaning they are considered similar to physical currency in financial transactions. Permitting the exchange of one gift card for another would enable cash-for-cash transactions, which retailers avoid due to inherent security risks and lack of an audit trail. The Federal Trade Commission (FTC) frequently issues warnings about scams involving gift cards, underscoring the vulnerabilities retailers seek to mitigate.

Beyond fraud prevention, these restrictions also address accounting complexities. The sale of a gift card is initially recorded as a liability, specifically deferred revenue, rather than immediate income. Allowing gift cards to purchase others could complicate revenue recognition and the tracking of liabilities, especially when considering “breakage,” which refers to unredeemed gift card balances. Maintaining clear financial records is essential for businesses to adhere to generally accepted accounting principles (GAAP) and other financial reporting standards.

Specific Scenarios and Clarifications

The ability to use gift cards for purchases can vary depending on the card type, leading to common misunderstandings. “Closed-loop” gift cards are specific to a single retailer or a defined group of affiliated merchants, such as a store-branded card redeemable only at that store. In contrast, “open-loop” gift cards, often branded with logos like Visa or Mastercard, function more like prepaid debit cards and can be used wherever that payment network is accepted. While open-loop cards offer broader usability for general merchandise, they are still restricted from purchasing other gift cards due to fraud prevention and financial control.

A common misconception is that if an item purchased with a gift card is returned for store credit, that credit can then be used to buy a gift card. Store credit is distinct from a gift card and subject to different rules. Issued for returns, it may have limitations, such as being non-transferable or having expiration dates, and cannot be used to acquire another gift card. Retailers aim to prevent consumers from converting store credit into a more flexible form of payment, especially if the original purchase was made under promotional terms.

Limited exceptions to the general rule may exist with niche or independent retailers, but these instances are rare and not the norm. The widespread policy across major retailers emphasizes a consistent stance against allowing gift card purchases with other gift cards. Consumers should always verify the specific policies of a retailer if they encounter such a situation.

Options for Unwanted Gift Card Balances

Since directly purchasing new gift cards with existing ones is not permitted, consumers with unwanted gift card balances have several practical alternatives. The most straightforward approach is to use the gift card for its intended purpose at the issuing merchant, perhaps for everyday necessities or items that can be utilized. This ensures the full value of the card is realized.

For those who do not wish to use the card at the original merchant, selling the gift card is a viable option. Numerous legitimate online marketplaces and kiosks facilitate the sale of unwanted gift cards. They typically offer a percentage of the card’s face value, ranging from 70% to 92%, depending on the card’s popularity. Platforms like CardCash, Raise, and GiftCash allow users to sell or trade their cards, often with competitive offers.

Another alternative is trading gift cards. Some online services and platforms enable consumers to exchange their gift cards for cards from different merchants, which can be useful if a different retailer’s card aligns better with their needs. Additionally, regifting an unused card to someone who would appreciate it is a common and practical solution, provided the card’s balance and any expiration dates are checked beforehand. Donating unused gift cards to charity is another impactful option, as many non-profit organizations accept gift card donations, converting them into funds for their causes. These donations may also be tax-deductible for the donor, depending on the charity and the donor’s tax situation.