Can You Buy Gift Cards With a Gift Card?

Consumers often find themselves with gift cards they do not intend to use for their original purpose and wonder if converting them into more desirable gift cards is an option. This article addresses this common query by exploring the general policies and financial considerations involved.

Understanding the Restrictions

Using one gift card to purchase another is generally not permitted by retailers and financial institutions. This policy primarily stems from fraud prevention measures designed to protect consumers and businesses. Gift cards, unlike cash, can be challenging to trace once activated, making them attractive for illicit activities, such as money laundering. Allowing gift card purchases with other gift cards could create an untraceable flow of funds, complicating efforts to combat financial crimes.

Retailers also incur processing fees from payment networks each time a gift card is purchased or redeemed. Allowing a gift card to buy another would effectively double these transaction costs for the same value, without generating additional revenue. From an accounting perspective, gift cards represent a liability until redeemed for goods or services. Treating them as a direct cash equivalent for purchasing other gift cards would complicate financial tracking and increase operational expenses.

Gift cards are typically considered a form of store credit or a prepayment for future goods and services from a specific merchant or network. They do not hold the same legal tender status as cash. Policies ensure gift cards are redeemed for products or services, rather than being used to acquire other financial instruments that could be easily converted or used for purposes outside the intended retail exchange.

Specific Scenarios and Card Types

While the general rule prohibits using one gift card to buy another, understanding the nuances between different card types is helpful. “Closed-loop” gift cards are specific to a single retailer or brand. These cards are designed for exclusive use within that merchant’s ecosystem. Attempting to use a closed-loop gift card to purchase another, even from the same retailer, is almost universally blocked by point-of-sale systems due to fraud and cost prevention policies.

“Open-loop” gift cards, issued by major payment networks like Visa, Mastercard, or American Express, function more like debit cards and are accepted wherever the network’s cards are processed. Despite their broader acceptance, these cards cannot be used to purchase other gift cards. The same concerns regarding financial fraud and transaction costs apply. Retailers configure their payment systems to recognize and decline these specific transactions.

Any exceptions to this general prohibition are rare and highly specific, often relating to unique store credit policies rather than typical gift card exchanges. For the vast majority of consumers, the rule remains consistent: gift cards, whether closed-loop or open-loop, are not interchangeable for purchasing other gift cards.

Alternatives for Unused Gift Cards

Consumers with unused gift cards have several viable options if they cannot use them to acquire other gift cards. The most straightforward approach is to use the card for its intended purpose, making purchases at the issuing retailer. Using the card for everyday essentials or useful items can fully utilize its value, ensuring its full monetary value is realized without additional costs or fees.

Another common alternative is to regift the card to someone who would use it. This option is convenient for cards received as presents that do not align with one’s needs. Regifting allows the card’s value to be transferred directly to a new recipient, ensuring it does not go to waste. It is a simple and effective way to ensure the gift card serves its purpose.

For those seeking to convert the gift card into cash or a different form of credit, reputable gift card exchange platforms offer a solution. These online marketplaces allow individuals to sell unwanted gift cards for a percentage of their face value, typically 70% to 90%, depending on demand. While not yielding the full original value, this provides a tangible return. Consumers should choose platforms that offer secure transactions, often utilizing escrow services, to protect both buyers and sellers. Donating an unused gift card to a charity can also be an option, potentially offering a tax deduction.