How to Transfer Money From a Gift Card to a Bank Account

Gift cards offer a convenient way to present a gift, yet recipients sometimes prefer the flexibility of cash. Converting a gift card balance into bank account funds often requires indirect methods, as direct transfers are not typically supported by card issuers. This guide explores options for transforming gift card balances into spendable cash.

Identifying Your Gift Card Type

The initial step in converting a gift card balance to cash involves identifying the type of gift card you possess. Methods for transferring funds vary significantly between card categories. Knowing your card type will streamline the process and prevent incompatible transfer attempts.

One primary category is the open-loop gift card, which functions similarly to a debit or credit card. These cards are branded with major payment network logos, such as Visa, MasterCard, American Express, or Discover. They are widely accepted wherever the respective network’s cards are honored. Identification involves looking for these network logos, a “gift card” designation, and sometimes a requirement for online activation.

In contrast, closed-loop gift cards are restricted to a specific merchant or group of affiliated merchants. Examples include cards issued by a retail chain, restaurant, or online store. These cards can only be used for purchases at the issuing entity and do not carry major payment network logos. Identifying a closed-loop card is straightforward; it features the store’s or brand’s logo and lacks general payment network branding.

Transferring Funds from Open-Loop Gift Cards

Open-loop gift cards, given their affiliation with major payment networks, offer several avenues for converting their value. One strategy involves linking the card to a digital payment application. Platforms like PayPal, Venmo, or Cash App may allow users to add these gift cards as a payment method, enabling transfers to a linked bank account. Some applications might impose restrictions or fees. The process involves entering the gift card number, expiration date, and security code into the app’s payment settings.

Another indirect method involves using the gift card to cover recurring expenses or bills. Some online bill payment services or utility providers accept general-purpose gift cards for payments. Utilizing the gift card for these expenditures frees up an equivalent amount of cash from your bank account. This effectively converts the gift card’s value into liquid funds.

Certain open-loop gift cards permit ATM withdrawals if a Personal Identification Number (PIN) has been assigned or can be set up. Cardholders can check for this feature or set a PIN by visiting the card issuer’s website or calling customer service. When using an ATM, fees may apply, typically ranging from $2.00 to $3.00 per transaction, imposed by both the card issuer and the ATM operator.

Purchasing a money order presents another option for converting open-loop gift card balances. Money orders can be acquired at locations such as the U.S. Post Office or various retail stores. The U.S. Post Office charges fees ranging from approximately $1.25 to $1.75 for domestic money orders up to $1,000. The gift card is used as payment for the money order, which can then be cashed or deposited into a bank account.

Converting Value from Closed-Loop Gift Cards

Closed-loop gift cards, limited to specific merchants, require different strategies to convert their value into cash. One approach is to sell the gift card through dedicated online marketplaces. Websites like CardCash or Raise specialize in facilitating the sale of unwanted gift cards, often providing a payout that is a percentage of the card’s face value, typically ranging from 75% to 90%. The process involves listing the card and receiving payment via direct deposit or a digital payment service once a buyer is found.

Physical gift card exchange kiosks, often located in grocery stores or shopping malls, offer an immediate cash payout for closed-loop cards. These kiosks provide an instant quote and dispense cash directly. The exchange rate is generally less favorable than online marketplaces, reflecting the convenience of an immediate transaction. The payout percentage can vary widely based on the card’s brand and the kiosk’s policies.

Another method involves purchasing an item with the gift card and then attempting to return it for a cash refund. This requires caution and awareness of store policies. Many retailers have specific return policies for items purchased with gift cards, often resulting in store credit rather than a cash refund. Review the store’s return policy thoroughly before attempting this method, as a cash refund is not guaranteed.

In rare instances, some retailers might offer an option to convert their store-specific gift cards into a general-purpose prepaid card. This conversion is not common and may involve associated fees, effectively transforming a closed-loop card into an open-loop one. Such an option would be advertised by the issuing merchant if available.

Important Considerations Before Transfer

Before attempting to transfer gift card funds, understand the potential costs and rules involved. Fees can significantly reduce the net amount received from a gift card transfer. These may include activation fees, dormancy fees, or transaction fees imposed by payment applications or money order purchases. Federal law, such as the Credit CARD Act, places limitations on certain fees, requiring that dormancy or inactivity fees can only be charged after one year of inactivity and must be clearly disclosed.

Verifying the exact balance on your gift card is a crucial preliminary step. This can be done by visiting the card issuer’s website or by calling the toll-free number printed on the back of the card. Knowing the precise balance ensures you attempt to transfer the correct amount and avoid issues with insufficient funds.

Reviewing the terms and conditions associated with your specific gift card is highly recommended. These documents outline policies regarding transferability, expiration dates, and any applicable fees. Understanding these terms can prevent unexpected charges or limitations on your ability to access the card’s value. The Credit CARD Act mandates that gift cards cannot expire earlier than five years from the activation date.

Security is a primary concern when dealing with any financial transaction. Use only reputable services and secure platforms when selling gift cards or linking them to payment applications. Be wary of scams that involve requests for gift card details or PINs from unverified parties, as gift cards are similar to cash and misuse can be difficult to trace.

Large transfers or frequent selling of gift cards could potentially have tax implications, particularly if received as compensation or if the activity resembles a business. While gift cards received as personal gifts are generally not taxable income, the Internal Revenue Service (IRS) views income from the sale of gift cards by businesses as taxable. For individuals engaging in substantial transactions, consulting with a tax professional can provide clarity on any reporting requirements.