Do You Get Reward Points for Buying Gift Cards?

The question of whether reward points are earned when purchasing gift cards is a common inquiry for individuals seeking to maximize their credit card benefits. The straightforward answer is not a simple yes or no, as the ability to earn rewards on gift card purchases is influenced by a combination of factors. These factors involve the specific policies of credit card issuers, the way merchants classify transactions, and the nature of the gift card itself. Understanding these complexities can help consumers navigate the landscape of reward programs more effectively.

Key Factors Influencing Reward Point Earning

Whether a gift card purchase earns reward points largely depends on the credit card issuer’s terms and conditions. Credit card companies establish their own policies regarding which transactions qualify for rewards. Some issuers explicitly exclude gift card purchases from earning rewards, or treat them as “cash equivalents” which typically do not accrue points. Others may not have such explicit exclusions.

A significant element in how transactions are categorized for reward purposes is the Merchant Category Code (MCC). MCCs are four-digit numbers assigned by credit card networks to classify businesses based on the type of goods or services they primarily sell. For example, a grocery store will have a different MCC than an office supply store.

When a purchase is made, the transaction is reported with the merchant’s MCC. Credit card reward programs use this code to determine if the purchase falls into a bonus category. Therefore, points earned might be based on the MCC of the retailer where the purchase is made.

The type of gift card purchased also plays a role. There are two main types: “closed-loop” and “open-loop” gift cards. Closed-loop gift cards are specific to a single retailer or a limited group of affiliated merchants, such as a Starbucks or Amazon gift card. These can only be redeemed at the issuing merchant and are often treated as standard merchandise purchases. Open-loop gift cards, like those branded by Visa, Mastercard, or American Express, function similarly to prepaid debit cards and can be used almost anywhere the respective payment network is accepted. These general-purpose gift cards are sometimes viewed with more scrutiny by card issuers due to their cash-like nature.

The overall structure of the reward program further influences earning potential. Reward programs can offer various types of benefits, such as cashback or travel points. Some programs might offer a flat rate of rewards on all purchases, while others provide accelerated rewards in specific bonus categories.

Common Scenarios for Earning Points on Gift Card Purchases

Earning reward points on gift card purchases is often successful when the transaction aligns with a credit card’s bonus categories. Many credit cards offer elevated rewards for spending at specific types of merchants, such as grocery stores or office supply stores. When a gift card, particularly a closed-loop one, is purchased at a merchant that falls into one of these bonus categories, the transaction typically codes according to the merchant’s MCC, allowing the cardholder to earn accelerated rewards. For instance, buying a retailer’s gift card at a grocery store could earn bonus points if groceries are a bonus category for the credit card used.

Online shopping portals can also present opportunities for earning bonus points or cashback on gift card purchases. These portals serve as intermediaries, rewarding users for initiating their online shopping through the portal’s platform before navigating to a retailer’s website. While many portals explicitly state that gift card purchases are excluded from earning bonus rewards, some users have reported occasionally receiving rewards for such purchases. This inconsistent earning can occur if the portal’s tracking system does not specifically identify the item purchased as a gift card.

Purchasing gift cards directly from certain retailers can sometimes yield rewards. If the retailer operates in a category that is a bonus category for a credit card, or if the retailer is part of a specific credit card promotion, the gift card purchase can earn points. For example, a card offering bonus points on department store purchases might provide rewards when a gift card is bought directly from a qualifying department store.

Situations Where Points Are Typically Not Earned

Points are generally not earned when purchasing open-loop gift cards directly from a financial institution or the credit card issuer’s own platform. These transactions are frequently coded as cash equivalents or direct financial products, which are often explicitly excluded from reward programs. Credit card agreements often contain clauses that prevent earning rewards on such transactions because the primary intent is often perceived as accessing credit as cash.

A significant concern for gift card purchases, particularly larger open-loop ones, is the risk of the transaction being categorized as a cash advance. When a credit card issuer codes a purchase as a cash advance, it typically incurs immediate fees and interest begins accruing immediately without a grace period.

While buying gift cards at a retail store is usually treated as a standard purchase, some issuers might flag large gift card purchases or transactions at certain vendors as cash equivalents, triggering these unfavorable terms. It is less common for standard retail gift card purchases to be treated this way, but it remains a possibility, especially for transactions from financial institutions or those deemed suspicious.

Specific merchants, even those operating within bonus categories, may have internal systems that prevent reward earning on gift card purchases. Some retailers might specifically code gift card sales to bypass typical reward structures, leading to no points or a reduced earning rate. This can occur when a retailer’s point-of-sale system differentiates gift card sales from other merchandise sales.

Credit card companies monitor for patterns that suggest “manufactured spending,” which involves making purchases primarily to generate rewards. While buying a few gift cards for personal use is generally acceptable, excessive or unusual gift card purchase patterns can be flagged by issuers. Such activity might lead to points being withheld, reward accounts being frozen, or even the closure of credit card accounts. Issuers aim to prevent abuse of their reward programs, and transactions that appear to be designed solely to earn large quantities of points without corresponding genuine spending can trigger these exclusions.

Navigating Gift Card Purchases for Rewards

To strategically approach gift card purchases for rewards, review your specific credit card’s terms and conditions. These documents outline which types of transactions are eligible for rewards and any exclusions. If the terms are unclear, contact the credit card issuer directly for clarification.

Understanding Merchant Category Codes (MCCs) can help anticipate reward earning potential. A merchant’s MCC often dictates how a transaction is categorized for rewards purposes. Some online tools or past transaction details on your credit card statement might reveal a merchant’s MCC, allowing you to align your gift card purchases with categories that offer bonus rewards. This knowledge enables you to select retailers where gift card purchases are more likely to yield favorable reward rates based on the merchant’s primary business classification.

When experimenting with gift card purchases for rewards, start with smaller amounts. This approach allows you to confirm whether points are earned for the specific gift card type and merchant combination before committing to larger purchases. Monitor your credit card statement after a small test purchase to verify if the transaction posted as a regular purchase and if the expected rewards were applied. If points are not awarded, or if the transaction is coded unfavorably, you can adjust your strategy accordingly.

Consider any activation fees associated with open-loop gift cards. These fees can significantly offset the value of any potential reward earnings. Factoring these costs into your decision ensures that any rewards earned truly represent a benefit.

Maintain careful records of gift card purchases and diligently monitor your credit card statements. This helps ensure that points are correctly awarded and that no transactions are unexpectedly coded as cash advances or excluded from rewards. Regular review of statements allows for prompt identification and resolution of any discrepancies, helping to protect your reward earnings and avoid unintended fees.