Can You Buy a Gift Card With a Gift Card?
Understand the practicalities and limitations of gift card use, and discover effective alternatives for managing their value.
Understand the practicalities and limitations of gift card use, and discover effective alternatives for managing their value.
Gift cards have become a widely popular choice for both gifting and personal use, offering a convenient alternative to cash for various purchases. They provide recipients with the flexibility to choose items they truly desire from specific retailers or across broader networks. A common question arises, however, regarding the ability to use one gift card to acquire another, a scenario that often presents unexpected challenges for consumers. This practice is typically restricted, highlighting underlying policy reasons.
Purchasing a new gift card with an existing one is generally not permitted. This policy is broadly enforced across the retail industry by many major retailers. For instance, companies like Walmart explicitly state that gift cards cannot be used to buy new gift cards. Attempts, whether online or in-store, typically result in an error message or refusal.
While widespread for store-branded gift cards, rare exceptions exist. “Open-loop” gift cards, such as those from Visa, Mastercard, or American Express, function more like debit cards and are accepted wherever debit cards are. These cards may occasionally allow other gift card purchases, though specific store policies can override this. It is important to note that even with flexible open-loop cards, some retailers block gift card purchases regardless of payment method.
Retailers and gift card issuers implement these restrictions to mitigate financial risks and complexities. A significant concern is fraud prevention, as gift cards can be exploited for money laundering or to legitimize illicit funds. Criminals might use stolen credit cards to buy gift cards, then convert them into other gift cards, making funds harder to trace. The Federal Trade Commission (FTC) warns about gift card scams, underscoring these preventative measures.
Another reason involves compliance with financial regulations for “prepaid access devices.” The Financial Crimes Enforcement Network (FinCEN) outlines rules for prepaid access, including gift cards with higher values or reloadable features. These regulations prevent money laundering and require businesses to implement anti-money laundering (AML) programs, including customer identification for high-value transactions. Allowing gift card purchases with other gift cards complicates compliance, creating anonymity that makes tracing funds difficult.
Accounting complexities also play a role. When sold, a gift card is a liability, or “deferred revenue,” not immediate revenue. Revenue is recognized only when redeemed for goods or services. Using one gift card to buy another involves complex liability adjustments without generating new sales or profit, obscuring accurate revenue recognition and financial reporting. This practice shuffles existing liabilities without encouraging new purchases, which is not beneficial for a retailer’s bottom line or financial transparency.
Since buying a new gift card with an existing one is restricted, consumers have alternative ways to use their gift card value. The most straightforward solution is to use the gift card for its intended purpose: purchasing goods or services from the issuing retailer. This ensures the full value is realized for items the cardholder needs or desires. Many consumers save money by using gift cards for everyday expenses like groceries or gas, freeing up cash for other uses.
For unwanted gift cards, reputable online marketplaces offer a way to sell or trade them. Websites like CardCash or Raise allow users to sell gift cards for cash, typically receiving a percentage of the face value. These platforms facilitate exchanging an unused gift card for funds that can then buy a preferred gift card or other necessities. While selling often involves a discount, it provides a practical way to convert an undesirable gift card into more flexible currency.
Another alternative is to regift the card to someone who can use it. This can be a practical option for holiday or birthday presents, ensuring the gift card’s value does not go to waste. Some online payment systems or digital wallets may allow users to add gift card balances, which can then be used for a wider range of online purchases, expanding the card’s utility. Always check the specific retailer’s policy or the gift card’s terms and conditions for accurate information on permissible uses.