Can You Pay a Credit Card With a Gift Card?

It is not possible to directly pay a credit card bill with a gift card. Credit card companies do not accept gift cards as a form of payment for debt. Gift cards function as prepaid value, but their mechanisms differ from accepted payment methods for credit card debt.

Direct Payment Limitations

Credit card issuers primarily accept payments through established banking channels, such as automated clearing house (ACH) transfers from bank accounts, personal checks, or debit card payments. A gift card is a prepaid instrument designed for purchasing goods or services, not for debt repayment or as a cash equivalent.

Gift cards come in two main types: closed-loop and open-loop. Closed-loop gift cards are issued by specific retailers or groups of affiliated merchants and can only be redeemed at those locations for merchandise or services. These cards cannot be applied to a credit card bill from a different financial institution.

Open-loop gift cards, often branded with major payment network logos such as Visa, Mastercard, American Express, or Discover, function more like prepaid debit cards. They offer broader acceptance at merchants wherever the associated network is accepted. Despite their resemblance to debit cards, these open-loop gift cards are not accepted for direct credit card payments by issuing banks.

Indirect Approaches

Although direct payment is not possible, gift cards can indirectly influence an individual’s ability to manage credit card debt. One practical method involves using gift cards for everyday expenses. By utilizing gift cards for routine purchases such as groceries, gasoline, or retail items typically paid for with cash or a debit card, individuals can free up liquid funds. This freed-up cash can then be allocated directly towards credit card payments, effectively leveraging the gift card’s value to reduce personal debt.

Another approach involves converting gift card balances into cash equivalents, though this process is indirect and may involve additional steps and potential value loss. One method is selling unwanted gift cards on secondary markets or online platforms. These platforms allow individuals to list their gift cards for sale, but the selling price is below the card’s face value, ranging from a small discount to a significant percentage. The cash received from such a sale can then be used to pay down credit card balances.

A less common method involves using certain types of gift cards to purchase money orders. Only open-loop, PIN-enabled gift cards, such as those issued by Visa or Mastercard, are accepted for money order purchases at select locations. Many retailers and financial institutions do not permit the purchase of money orders with gift cards. If successful, the money order can then be deposited into a bank account and used to pay the credit card bill.

Key Practical Considerations

Converting gift cards into cash for credit card payments involves several practical considerations, including fees and value loss. When selling gift cards on secondary markets, individuals should anticipate receiving less than the card’s face value. Online platforms and gift card exchanges charge commissions or fees, which can reduce the payout by a percentage of the card’s value. This means that a $100 gift card yields only $80 to $90 in cash, depending on the platform and demand for the specific retailer’s card.

Purchasing money orders with gift cards also incurs fees. For instance, the United States Postal Service (USPS) charges fees ranging from approximately $1.05 to $3.60 for money orders, depending on the amount. Walmart charges less than $1 for money orders. Banks may charge around $5. These fees reduce the effective cash value obtained from the gift card.

Selling gift cards online also carries security and fraud risks. Instances of fraudulent buyers attempting to use stolen payment methods or engaging in chargeback scams exist. Individuals should use reputable platforms that offer seller protection and verify the card’s balance before selling. Sharing sensitive card details should only occur through secure channels after a confirmed sale.

Utilizing gift cards for credit card payments is not a sustainable financial strategy for long-term debt management. While it can offer a temporary influx of funds, it does not address underlying financial issues or provide a consistent solution for ongoing debt. This method lacks the benefits of traditional financial planning, such as building credit history or earning rewards points on credit card spending. For individuals facing persistent credit card debt, focusing on budgeting, debt repayment strategies, and seeking professional financial guidance remains important.