Can You Get a Gift Card With a Gift Card?

Gift cards are a ubiquitous form of payment, offering recipients flexibility to choose items from specific retailers or broader networks. A common query is whether an existing gift card can be used to purchase another. This often stems from a desire to consolidate balances, convert store-specific cards, or exchange an unwanted gift. Understanding the financial mechanisms and operational limitations behind gift cards helps clarify why such transactions are typically restricted.

The Nature of Gift Card Payments

Gift cards are generally classified as stored value products or store credit, fundamentally differing from traditional payment methods like cash, credit cards, or debit cards. When a gift card is sold, the retailer records the amount as a liability, specifically deferred revenue, with revenue recognized only when the card is redeemed for merchandise.

A primary reason for restricting gift card-to-gift card transactions is fraud prevention, particularly concerns about money laundering. Such exchanges could enable criminals to convert fraudulently obtained gift cards into untraceable ones. The Federal Trade Commission (FTC) frequently issues warnings about scams involving gift cards.

From an accounting perspective, permitting a gift card to purchase another creates complex challenges for tracking sales and revenue recognition. It complicates the identification of when actual goods or services have been provided, as one form of stored value is merely being swapped for another. This can obscure financial reporting and compliance with accounting standards, which require revenue recognition upon fulfillment of a performance obligation. Gift cards are not treated as cash equivalents for purchasing other stored-value products due to these financial and security considerations.

Retailer Policies and System Limitations

The fundamental financial and security principles governing gift cards directly translate into specific operational policies and technical limitations enforced by retailers. Most point-of-sale (POS) systems are programmed to prevent the use of a gift card as payment for another gift card. This technical configuration directly addresses fraud prevention and revenue accounting complexities.

Even in scenarios where a system might technically allow it, most retailers maintain explicit policies prohibiting such transactions. These store-specific rules align with the broader financial industry’s efforts to mitigate risks associated with money laundering and fraud. Retailers aim to simplify their transaction processes and close potential loopholes that could be exploited.

While general-purpose gift cards, such as those issued by Visa, Mastercard, or American Express, function similarly to debit cards, their acceptance for purchasing other gift cards is also commonly restricted. These restrictions are typically imposed by the individual retailer’s policies and payment processing rules, stemming from the same underlying concerns about security and financial oversight. The core issue remains the exchange of one form of stored value for another, rather than a direct purchase of goods or services.

Using Gift Cards for Other Purchases

Given the typical restrictions on using one gift card to purchase another, consumers have several practical alternatives for utilizing unwanted or unused cards.

• Redeem it for goods or services from the issuing retailer. This primary and most straightforward use fulfills the card’s intended purpose and ensures the full value is realized.
• Use online gift card exchange platforms such as CardCash, Raise, and GiftCash. These allow users to sell their unwanted gift cards for cash or trade them for cards from different retailers. While these platforms typically pay a percentage of the card’s face value, often ranging from 50% to 92%, they provide an effective way to convert an unused card into more versatile funds.
• Trade or gift the card to friends or family members who might have a use for it. This approach allows the full value of the card to be utilized without incurring any fees or discounts associated with exchange platforms.
• Additionally, some charities accept gift card donations, which can be a meaningful way to contribute to a cause. Donations to qualified charitable organizations may also be tax-deductible, though it is the purchaser who typically claims the deduction.

Always reviewing the terms and conditions on a specific gift card is advisable, as they disclose any unique redemption rules, potential fees, or expiration dates. Most gift cards cannot expire earlier than five years from their issue or last load date due to federal regulations.