Can You Buy Gift Cards With Credit Cards?

Gift cards are a common way to give presents or manage personal spending, while credit cards offer convenience and various benefits. Consumers often wonder if they can use their credit cards to purchase gift cards. Understanding these transactions is important for informed financial decisions.

Is It Possible to Buy Gift Cards with Credit Cards?

Generally, purchasing gift cards with a credit card is possible at many retailers. Most stores in the United States allow the use of credit cards for their own store-specific gift cards, processing them as a regular retail purchase.

However, the situation can differ when purchasing general-purpose gift cards, such as those branded with Visa, Mastercard, or American Express. These “open-loop” gift cards, which can be used at various merchants, are sometimes treated differently by credit card issuers. While many purchases of these cards may still be processed as standard transactions, some credit card companies might classify them as a “cash advance.” This classification can also occur if you buy gift cards directly from a financial institution.

Understanding Cash Advance Implications

When a credit card purchase is categorized as a cash advance, it incurs distinct financial consequences. A cash advance is essentially a short-term loan from your credit card, and interest begins accruing immediately from the transaction date, without any grace period. This means you start paying interest on the amount borrowed right away.

Cash advances typically carry higher interest rates than standard purchase APRs, often ranging from 17.99% to 29.99%. In addition to interest, a cash advance fee is also charged, commonly between 3% to 5% of the advanced amount, or a flat fee of around $10, whichever is greater. Credit card companies classify certain gift card purchases as cash advances to prevent “credit card churning,” which involves using credit to obtain cash or cash equivalents, potentially bypassing normal transaction fees or earning rewards inappropriately.

Strategic Reasons for Purchasing

Despite the potential for cash advance implications, individuals may consider purchasing gift cards with a credit card for specific strategic reasons. One primary motivation is to earn credit card rewards, such as points, miles, or cashback. Many rewards cards offer benefits for every dollar spent, and buying gift cards can contribute to these earnings.

Another strategic use is to meet minimum spending requirements for a credit card sign-up bonus. Issuers often offer substantial bonuses for new cardholders who spend a certain amount within an initial period, and gift card purchases can help reach these thresholds. Furthermore, some consumers use gift cards for budgeting purposes. By converting credit into a gift card for a specific merchant, they can control spending at that particular store or service.

Important Considerations and Best Practices

When considering purchasing gift cards with a credit card, consider several factors and best practices to avoid unexpected costs or issues. Unlike credit card purchases, gift card transactions typically offer limited recourse if the card is lost, stolen, or used fraudulently, as they are often treated like cash. Most gift cards are non-refundable, and their value can be difficult to recover if they are compromised.

Before making a purchase, it is advisable to check your credit card terms and conditions or contact your issuer directly to understand their policy on gift card purchases. This clarifies whether the transaction will be treated as a standard purchase or a cash advance. Starting with small gift card amounts can help you assess how the transaction is coded by your issuer. Be aware of retailer-specific policies, as some stores may limit the number of gift cards purchased with a credit card due to fraud concerns.