Can You Purchase Gift Cards With a Credit Card?

Purchasing gift cards with a credit card is generally possible, but involves considerations related to merchant rules, credit card issuer policies, and the specific type of gift card. Understanding these factors helps consumers navigate potential restrictions and avoid unexpected costs or impacts on their credit.

Merchant Policies and Purchase Limitations

Many retail locations, including grocery stores and department stores, typically allow customers to purchase gift cards with a credit card. This is often the case for lower-denomination, store-specific gift cards. However, retailers often implement limitations on these purchases, such as caps on transaction size or outright bans on purchasing certain types of gift cards, especially those that function like cash.

Merchants impose these restrictions primarily to prevent fraud and reduce their exposure to financial losses. Gift cards, particularly those with broad usability, can be targets for fraudulent activities, including money laundering or “manufactured spending” schemes. Policies differ significantly across various retailers and online platforms.

Credit Card Issuer Policies

Beyond merchant rules, credit card issuers also have policies that affect gift card purchases. Some issuers may classify gift card purchases, particularly for high-value or general-purpose cards, as a “cash advance” rather than a standard retail purchase. This reclassification carries significant financial implications for the cardholder.

Cash advances typically incur immediate interest charges, with no grace period, and come with higher interest rates than regular purchases, often ranging from 20% to 30%. Additionally, a cash advance fee, usually 3% to 5% of the transaction amount or a minimum of $10, is applied. Gift card purchases may also be excluded from earning credit card rewards, points, or cashback, as many card issuers’ terms and conditions specifically exclude such transactions from reward programs. A large gift card purchase can also temporarily increase a cardholder’s credit utilization ratio, which is the amount of credit used compared to the total available credit. Keeping this ratio below 30% is recommended to maintain a healthy credit score.

Understanding Different Gift Card Types

The type of gift card significantly influences how it is treated by merchants and credit card issuers. Gift cards are broadly categorized into two main types. Closed-loop gift cards are redeemable only at a specific merchant or a group of affiliated merchants, such as a particular restaurant or retail chain. These cards are generally easier to purchase with credit cards, as they are less likely to be perceived as cash equivalents due to their limited use.

In contrast, open-loop gift cards, also known as general-purpose or prepaid debit cards, are branded by major payment networks like Visa, Mastercard, or American Express. These cards function much like a traditional debit card and can be used almost anywhere the respective payment network is accepted. Due to their broader usability and likeness to cash, open-loop gift cards are more susceptible to triggering merchant restrictions, cash advance classifications, and additional fees when purchased with a credit card.