Can You Buy a Gift Card With a Gift Card?

It is generally not possible to purchase a gift card using another gift card. Most retailers have policies in place that prevent these types of transactions. This restriction exists for several practical and financial reasons, including efforts to prevent fraud and manage accounting complexities.

Understanding Retailer Policies

Retailers typically prohibit using one gift card to purchase another primarily due to fraud prevention measures. Allowing such transactions could facilitate money laundering, where illicitly obtained funds are converted into gift cards and then “washed” by purchasing other gift cards, making the origin of the funds harder to trace. Criminals might also use stolen credit cards to buy gift cards and then convert those into different gift cards to obscure the fraudulent acquisition. Retailers implement policies and procedures to deter these activities, sometimes limiting the face amount of gift cards sold, to comply with anti-money laundering regulations.

Another significant factor is the accounting treatment of gift cards. When a gift card is sold, the retailer does not immediately recognize that amount as revenue; instead, it is recorded as a liability, specifically deferred revenue, on their balance sheet. This liability represents the retailer’s obligation to provide goods or services in the future. If a gift card could be used to purchase another, it would complicate revenue recognition principles, as revenue is recognized only when a performance obligation is satisfied, meaning when the card is redeemed for goods or services. Converting one liability into another without an actual sale of goods or services can create complex tracking issues and potential financial reporting discrepancies.

Situations Where It Might Differ

While the general rule is that a gift card cannot be used to purchase another, there are nuances and specific scenarios where the principle might appear to bend. Store credit, for instance, differs fundamentally from a traditional gift card. Store credit is often issued for merchandise returns without a receipt or as part of a loyalty program, and is more restricted in use, often non-transferable, and may expire. Unlike gift cards, which are considered a payment method regulated by law, store credit is an internal credit balance within a specific store.

In rare instances, a retailer’s internal policy might permit the use of store credit to acquire a new gift card, but this is an exception rather than a common practice across the industry. Reloadable prepaid cards, which can have value added to them, are distinct from purchasing a new, separate gift card with an existing one. Reloading involves adding funds to an existing account, typically with cash, debit, or credit, not exchanging one stored-value instrument for another. While some grocery stores or large retailers might allow using their own gift cards to purchase third-party gift cards, this is not a universal allowance.

Alternative Uses for Gift Cards

For consumers holding unwanted gift cards, several legitimate avenues exist beyond attempting to purchase another gift card. The primary and most direct use for any gift card is to purchase goods and services from the issuing retailer or brand. This can be done in-store or online. Using a gift card for partial payments on a larger purchase, and covering the remaining balance with another payment method, is also a common and accepted practice.

If the gift card is for a store or service that is not personally useful, consider using it to purchase items that can be gifted to others for holidays or special occasions. Another option is to donate the gift card to a charitable organization. Many non-profits accept gift card donations, using them for supplies or converting them into funds, often providing a tax deduction. Reputable online marketplaces also exist where unwanted gift cards can be sold, typically for a percentage of their face value, offering a way to convert the stored value into cash, albeit at a discount.