Can You Use a Credit Card to Buy a Gift Card?

Many consumers consider using a credit card to purchase gift cards, often for convenience or to earn rewards. Gift cards themselves generally fall into two main categories: open-loop and closed-loop. Open-loop gift cards are branded with a major payment network, such as Visa, Mastercard, or American Express, and can be used anywhere that network is accepted, similar to a debit card. Closed-loop gift cards, conversely, are specific to a single retailer or a small group of affiliated merchants and can only be redeemed at those locations. Understanding this distinction is fundamental to navigating the complexities of using credit cards for gift card purchases.

Credit Card Policies on Gift Card Purchases

Whether a credit card can be used to buy a gift card often depends on both the merchant’s policy and the credit card issuer’s rules. Many retailers allow credit card purchases for gift cards, but some may impose limits, especially for larger amounts. These restrictions are often in place to mitigate various risks associated with gift card sales.

Open-loop gift cards, due to their broad usability and cash-equivalent nature, are more likely to face restrictions compared to closed-loop cards. Issuers implement these safeguards primarily to prevent fraudulent activities, such as the use of stolen credit cards to acquire easily transferable value, deter money laundering, and prevent exploitation of reward programs.

Transaction Classification and Implications

When a credit card purchase of a gift card is permitted, the transaction’s classification by the credit card issuer has significant financial implications for the cardholder. Some gift card purchases, particularly those for open-loop cards or larger sums, may be processed as a cash advance rather than a standard retail purchase. A cash advance incurs immediate interest charges from the transaction date, meaning there is no interest-free grace period. These advances also come with higher annual percentage rates (APRs) than standard purchases and carry a specific cash advance fee, which can range from 3% to 5% of the transaction amount or a minimum flat fee, such as $5 or $10.

Conversely, other gift card purchases, often for closed-loop cards or smaller amounts, might be classified as a regular purchase. This classification allows for the standard grace period before interest accrues and may qualify for rewards. However, many credit card reward programs explicitly exclude gift card purchases from earning points, miles, or cashback, even if the transaction is otherwise processed as a regular purchase. Furthermore, gift card purchases are not covered by credit card benefits such as purchase protection, extended warranties, or return policies, which apply to physical goods.

Other Payment Methods for Gift Cards

For those seeking to acquire gift cards without using a credit card, several alternative payment methods are widely accepted. Consumers can purchase gift cards using a debit card, which directly draws funds from a linked bank account. Cash payments are also a straightforward option for buying gift cards in physical retail locations. For online gift card purchases, bank transfers or direct debits may be available as secure payment alternatives.