Can You Withdraw Cash From a Gift Card?

Gift cards are a popular and convenient payment option. Many recipients wonder if they can convert unused balances to cash. Understanding how gift cards work is key to exploring this.

How Gift Cards Work

Gift cards are prepaid instruments with a loaded monetary value for goods or services. Unlike traditional debit cards, gift cards are generally not linked to a bank account. They come in two primary forms: closed-loop and open-loop.

Closed-loop gift cards are issued by a specific merchant or a group of affiliated merchants and can only be redeemed at those particular locations. For example, a gift card from a coffee shop can only be used at that coffee shop’s establishments.

Open-loop gift cards, by contrast, are backed by major payment networks such as Visa, Mastercard, American Express, or Discover. These cards offer greater flexibility, as they can be used anywhere the respective network is accepted, functioning much like a prepaid debit card.

Methods for Converting Gift Cards to Cash

While gift cards are not designed for direct cash withdrawal, several indirect methods exist to convert their value into cash or a cash equivalent. One common approach involves reselling the gift card through various channels. Online marketplaces, such as CardCash, Raise, or GiftCash, specialize in buying and selling unwanted gift cards. These platforms offer a percentage of the card’s face value, typically ranging from 70% to 92%, with the payout depending on the brand’s popularity and demand. Peer-to-peer sales to friends or family offer another informal method, potentially yielding a higher percentage of the card’s value without platform fees.

Another method often considered is purchasing an item with the gift card and then returning it for cash. However, most retailers have policies to prevent this type of cash conversion. Generally, if an item is purchased with a gift card and then returned, the refund will be issued back onto a gift card or as store credit, not as cash.

For open-loop gift cards, certain options exist that can indirectly free up cash. Some open-loop cards, particularly those resembling prepaid debit cards, may be used to pay certain bills, such as utility bills or credit card bills, if the biller accepts credit card payments. This strategy allows an individual to use the gift card balance for an expense they would otherwise pay with cash, effectively preserving their liquid funds. Additionally, some open-loop gift cards, especially those marketed as prepaid debit cards, might allow ATM withdrawals if they have a Personal Identification Number (PIN) set up. This is not a universal feature of all gift cards, and it often involves activating the card and setting a PIN through the issuer’s website.

Transferring the balance to a digital wallet, like PayPal or Venmo, is another avenue for open-loop gift cards. After linking the gift card as a payment method, funds can sometimes be transferred from the digital wallet to a linked bank account, though this may involve fees and depends on the specific gift card and platform policies.

Understanding Limitations and Practicalities

Attempting to convert gift cards into cash often involves several limitations and practical considerations. A significant drawback of reselling gift cards is the loss of face value, as platforms typically offer less than the card’s full amount due to fees and market dynamics. These platforms may also charge seller fees, further reducing the net amount received.

Retailer return policies pose a substantial barrier to obtaining cash directly from a gift card. Most stores will issue a store credit or a new gift card for returns made with a gift card, rather than providing cash. While some states have laws requiring merchants to cash out gift card balances below a certain threshold, often between $5 and $10, these laws are not universal and typically apply only to store-specific gift cards, not bank-issued ones.

Gift cards can also be subject to various fees, though federal law provides some protections. Under the Credit Card Accountability Responsibility and Disclosure (CARD) Act, gift cards cannot expire for at least five years from their activation date, and dormancy or inactivity fees are generally prohibited unless there has been no activity for at least 12 months. If such fees are permitted, they cannot exceed one dollar per month. However, fees can still apply for activation or ATM withdrawals, particularly for open-loop cards.

Security concerns are also relevant, especially when selling gift cards online. Risks include dealing with fraudulent buyers who might use stolen payment methods or attempt chargeback scams. It is advisable to use reputable platforms that offer seller protection and avoid sharing sensitive card details, such as PINs or full card numbers, before confirming secure payment. Overall, converting gift cards to cash is often an inconvenient process, requiring extra steps and typically resulting in less than the original value.