Can You Buy Gift Cards With a Credit Card?

Purchasing gift cards with a credit card is a common consideration for many consumers. While generally possible, the process is nuanced, involving different policies from merchants and credit card issuers. Understanding these conditions, potential costs, and financial impacts is important for anyone considering this type of transaction.

Situations Where You Can Buy Gift Cards with a Credit Card

Most major retailers, including department stores, grocery stores, and online merchants, allow consumers to purchase gift cards using a credit card. This includes both store-specific gift cards, redeemable only at a particular brand, and general-purpose gift cards, such as those from Visa, Mastercard, or American Express, usable wherever the respective network is accepted. Online purchases also frequently permit credit card payments for digital or physical gift cards.

However, merchant policies can vary significantly. Some retailers, particularly smaller businesses, accept only cash or debit for gift card transactions. Even large retailers may impose limits on the value or number of gift cards purchased with a credit card to mitigate risks like fraud.

Common Restrictions and Fees

A concern when buying gift cards with a credit card is the possibility of the transaction being classified as a cash advance. A cash advance is a short-term loan against your credit limit, with different terms than regular purchases. If a gift card purchase is treated as a cash advance, it incurs immediate fees, typically ranging from 3% to 5% of the transaction amount, often with a minimum charge of $5 or $10. Interest also begins to accrue immediately on cash advances, usually at a higher annual percentage rate (APR) than standard purchases, with no grace period. Credit card issuers may categorize general-purpose or large gift card purchases as cash advances to deter manufactured spending.

Beyond potential cash advance fees, many general-purpose gift cards, such as Visa or Mastercard, come with activation fees. These fees are charged at the time of purchase, regardless of the payment method, and cover the cost of issuing the card. Activation fees commonly range from $2.95 to $6.95, depending on the card’s value. For example, a $50 Mastercard gift card might have a $3.95 activation fee, while a $500 card could have a $6.95 fee.

Merchants also implement policies regarding gift card sales to prevent fraud and money laundering, particularly for open-loop gift cards. These policies might include limiting the number of gift cards bought in a single transaction or restricting credit card use for high-value gift card purchases. Gift cards, especially general-purpose ones, can be easily converted to cash, making them attractive targets for fraudulent activities involving stolen credit cards.

Impact on Credit and Rewards

Using a credit card to buy gift cards can affect your credit utilization, which is the percentage of your available credit currently in use. Large gift card purchases, like any other significant transaction, can temporarily increase your credit card balance, raising your credit utilization ratio. Financial experts generally recommend keeping credit utilization below 30% of your total available credit, as exceeding this threshold can negatively impact your credit score. Consistently high utilization signals to lenders that you might be over-reliant on credit, which can be seen as a risk.

The most direct negative impact on your credit score typically arises if a gift card purchase is treated as a cash advance and the associated fees and higher interest are not paid promptly. Accumulating debt from these costly transactions and failing to meet payment obligations can significantly harm your credit history. Credit card companies also monitor spending patterns; unusually large or frequent gift card purchases might trigger fraud alerts or raise flags with the issuer.

Regarding rewards, many credit card issuers explicitly exclude gift card purchases, particularly general-purpose or cash-equivalent gift cards, from earning rewards points, miles, or cashback. Some card agreements state that gift card purchases are ineligible for rewards, or they may offer a reduced earning rate. This policy prevents consumers from “manufacturing spending” simply to earn rewards without a genuine purchase of goods or services. It is important to review your specific credit card’s terms and conditions to understand its policy on gift card purchases and rewards eligibility.