Can You Buy Gift Cards on a Credit Card?

Purchasing gift cards with a credit card is generally possible and convenient. However, consumers should understand the nuances, as policies, merchant restrictions, and financial implications vary.

Credit Card Company Policies

Credit card companies classify gift card purchases in different ways, impacting fees and rewards. Direct retailer purchases are usually processed as standard purchases, subject to regular interest rates. However, some issuers may classify gift card purchases, especially for large amounts or network-branded cards, as cash advances.

Cash advances come with significant financial consequences, including immediate interest accrual and specific fees. Unlike standard purchases, interest on cash advances accrues immediately, without a grace period. Additionally, a cash advance fee, typically 3% to 5% of the amount or a minimum of $10, is imposed.

Credit card rewards programs often exclude gift card purchases from earning points, miles, or cashback. Issuers often have policies against “manufactured spending” (buying gift cards to meet spending thresholds or accumulate rewards), even if some purchases initially earn rewards. Violating these terms can result in rewards being revoked or account closure, as these policies prevent program abuse.

Merchant Restrictions

Merchants often have policies on credit card use for gift card purchases. Some stores prohibit or limit these transactions due to fraud concerns and processing fees. Criminals often target gift cards using stolen credit card data, making merchants hesitant. This risk shifts to merchants, especially if their checkout technology isn’t updated for chip card transactions.

Merchants may also restrict large-volume gift card purchases to deter money laundering. Some retailers might cap the combined amount of gift cards purchased in one transaction. Limitations are often communicated via signs, POS prompts, or cashiers. These measures help merchants mitigate financial risks, including processing fees.

Financial Considerations

Purchasing gift cards with a credit card has personal financial implications beyond immediate fees. A significant aspect is the impact on your credit utilization ratio, a key credit scoring factor. This ratio measures credit used against total available credit; experts recommend keeping it below 30% for a healthy score. A large gift card purchase can increase your outstanding balance, raising utilization and potentially lowering your credit score.

The financial burden is substantial if the purchase is a cash advance. Immediate interest accrual and cash advance fees mean the gift card’s actual cost can quickly exceed its face value. For example, a 5% fee on a $100 gift card adds $5, plus daily interest until paid. Paying the balance in full and on time is crucial to avoid significant interest, regardless of classification.

Network-branded gift cards also carry a purchase fee, typically $2.95 to $6.95, added by the issuer. While using a credit card might seem like an easy way to earn rewards, cash advance fees, immediate interest, and rewards exclusions can offset perceived benefits. Evaluate costs versus potential rewards or convenience before using a credit card for gift card purchases.