Can You Buy Gift Cards With a Credit Card?

Purchasing gift cards with a credit card is often possible, but involves various considerations from both the credit card issuer and the retailer. Understanding these factors is important for consumers to make informed financial decisions. The implications extend beyond a simple transaction, touching upon fees, interest, and even credit scores.

Understanding Credit Card Issuer Policies

Credit card issuers often classify gift card purchases in specific ways, which can significantly impact the cardholder. Many card companies view gift cards as “cash equivalents” or “quasi-cash transactions” because they can be easily converted into cash or used like cash at various merchants. This classification is typically based on Merchant Category Codes (MCCs) assigned to the transaction.

When a transaction is categorized as a cash equivalent, it can trigger cash advance terms, which differ substantially from standard purchase terms. Cash advances generally come with a higher Annual Percentage Rate (APR) than regular purchases, often ranging from 20% to 30% or even higher. Unlike standard purchases that may offer a grace period before interest accrues, interest on cash advances typically begins to accumulate immediately from the transaction date. This means that even if the balance is paid quickly, interest charges will still apply. Additionally, cash advance fees are usually assessed, often a percentage of the amount advanced, such as 3% to 5%, or a flat fee, whichever is greater (e.g., $10). These policies are determined by the credit card issuer and the bank that issues the card. Consumers should carefully review their specific credit card terms and conditions to understand how gift card purchases are categorized and the associated costs.

Store Purchase Rules

Beyond credit card issuer policies, individual retailers and merchants also have their own rules regarding gift card purchases made with credit cards. These store-specific policies are distinct from those of credit card companies and are implemented at the merchant’s discretion. Some stores may impose limits on the total dollar amount of gift cards that a customer can purchase with a credit card in a single transaction or within a 24-hour period. These limits are often put in place to mitigate risks such as fraud or money laundering.

While many retailers, especially larger ones, generally allow the purchase of their store-specific gift cards with a credit card, some might entirely prohibit such transactions. This is less common for general-purpose gift cards sold at grocery stores or similar outlets, but it can occur. Consumers planning to make substantial gift card purchases should inquire directly with the store beforehand. Understanding these merchant-specific rules can help avoid unexpected issues at the point of sale.

Transaction Financial Outcomes

When a credit card is used for gift card purchases that are categorized as cash equivalents, the financial implications for the cardholder can be substantial and immediate. Cash advances typically come with a higher Annual Percentage Rate (APR) and interest begins to accrue immediately, unlike regular purchases.

In addition to these costs, cash advance fees are typically levied, often a percentage of the amount advanced. For example, a $500 gift card purchase processed as a cash advance could incur a fee of $15 to $25. Furthermore, gift card purchases classified as cash advances usually do not qualify for credit card rewards, such as points, cashback, or airline miles. This negates one of the primary benefits many consumers seek when using a credit card.

A large gift card purchase, particularly if it consumes a significant portion of the available credit limit, can temporarily increase a cardholder’s credit utilization ratio. Credit utilization, the amount of credit used relative to the total available credit, is an important factor in credit scoring. A high utilization ratio, generally above 30%, can negatively impact credit scores, although this effect is typically temporary if the balance is paid down quickly.