Gift cards can be a great way to celebrate a special occasion or show someone what they mean to you. And gift cards are easy to buy, including with a credit card. Most major retailers and online platforms allow you to buy gift cards with a credit card, just like any other purchase.
Still, people sometimes wonder about hidden fees or whether credit card issuers treat gift cards as cash purchases. After all, taking cash from your credit card often comes with high interest rates or other penalties, so it’s important to understand the rules when you buy a gift card with a credit card.
Generally, buying a gift card with a credit card is straightforward and safe. But at Remitly, we believe in making financial transactions as easy to understand as possible. In this guide, we’ll explain the benefits of using a credit card to buy a gift card and highlight potential costs to be aware of.
Why use a credit card for gift cards?
Credit cards definitely make life easier. But the reasons to buy gift cards with a credit card go beyond convenience. From improving security to earning rewards, here are some of the main reasons people use credit cards instead of cash or debit cards to buy gift cards.
Earning rewards and maximizing points
Many credit cards give you reward points based on how much you spend. The idea is to encourage you to use your credit card, and it can be a great incentive. Rewards include cash back, airline miles, points for everyday spending, or consumer products. And some cards include category bonuses for particular kinds of spending. That means if you buy a gift card from somewhere like a grocery store or pharmacy, you might get extra points.
Here’s what that might look like: imagine you have a credit card that earns 3 to 5% cash back on spending at grocery stores. If you buy a gift card there, you get that reward for yourself. If you pay off your credit card balance in full by the end of the month, you won’t pay any interest on your purchase, so it’s basically free money.
Some people take this strategy further. They buy gift cards for themselves from businesses they know they’re going to use, but that wouldn’t normally give them extra bonus points. By buying a gift card from a store that gives these extra points, they maximize their rewards while only making purchases they would normally make anyway.
This is a smart way to take advantage of bonus card schemes, but it does require being organized. If you carry a balance on your credit card and pay interest on your purchases, that can wipe out your profits, so it’s important to be organized and know all the rules.
If you’re going to do this, confirm that your credit card issuer treats gift card purchases as standard retail transactions. They usually do. But note that certain types of gift cards may be treated differently. For instance, prepaid Visa or MasterCard gift cards or reloadable cards may be treated as a cash advance. These usually carry much higher rates of interest, which can easily wipe out any savings you might have made.
Better budgeting and spending tracking
Another of the advantages credit cards have over cash is their use for budgeting. We’ve probably all had that experience when spending in cash, where we find ourselves wondering where our money went. When you make your purchases on a credit card, all you have to do is open your banking app or check your statement, and you’ll clearly see what you’ve been spending and where.
Buying gift cards with a credit card means you create a digital paper trail that makes it easy to categorize your spending, review expenses, and stay within budget. This is actually useful for people who buy gift cards for specific purposes, like groceries, travel, or gifts. You’ll be able to clearly see what you spent, and where.
Security and fraud protection
Another area where credit cards shine is in their security. Cash is easily spent and can be lost or damaged. Plus, it offers no protection for your purchases. Credit cards, on the other hand, protect you against fraud. If somebody steals your credit card information, you can challenge any purchases they make and hopefully get your money back.
Credit cards can also help you in cases of fraud or when a merchant doesn’t provide the service you paid for. If you feel you’ve been ripped off, you can talk to your credit card company and see if they can help you reverse the charge.
Gift cards themselves can be lost or stolen. Using a credit card to buy them adds an extra layer of protection in case something goes wrong.
The truth is, credit cards provide protections and rewards when buying gift cards that you won’t get any other way. Whether you’re buying gift cards for other people or even for yourself to benefit from credit card reward points, there are some very good reasons why it makes sense to buy a gift card with a credit card.
Potential fees and other risks
There are lots of good reasons to buy a gift card with a credit card. However, to make the most of the benefits, it’s important to understand the details that can catch people off guard. Knowing about these potential fees upfront helps you avoid surprises and use your credit card more effectively.
The cash advance risk
This is the key issue that people worry about when buying gift cards with a credit card, and there’s a good reason for that. Most credit cards charge more for a cash advance than they do for a retail purchase. Often, cash advances come with a higher rate of interest, and that interest may be charged from day one, while with retail purchases, you normally get a 30-day grace period before interest begins to add up.
Luckily, store-specific gift cards are usually processed as normal retail purchases. They don’t trigger extra fees, and they help you earn rewards.
The exception is what are known as cash equivalent gift cards, like the prepaid Visa or MasterCard gift cards we mentioned earlier. These cards can be used anywhere and function more like credit cards, so it’s possible your bank may treat them as a cash advance instead of a retail purchase.
Here’s what you could be facing:
- A cash advance fee (often 3 to 5% of the amount charged)
- A higher interest rate than normal purchases
- Interest from day one, with no grace period.
Now, not all credit card issuers do this. Every bank and card provider has their own policies. But if you intend to buy prepaid Visa or MasterCard gift cards, it’s a good idea to check the terms on your card to make sure you don’t run into this problem.
Activation fees
Store-specific cards usually don’t have an activation fee. But most cash equivalent gift cards do. These one-time activation fees are often around $4.95, but larger denominations may be higher.
These fees are charged by the card issuer, not your credit card company. So you may find yourself paying $104.95 for a $100 gift card. These cards give you extra flexibility in where you spend your money, but these fees can make them more expensive than store-specific gift cards.
Fraud alerts and declined transactions
Most people won’t run into this, but if you buy a lot of gift cards or cards with very high dollar amounts, it might trigger a fraud alert with your bank. That’s because a lot of scammers use gift cards as part of their scams. Banks are wary of unusual buying patterns, so if you suddenly buy 50 gift cards in one go, they might suspect a scam and decline the transaction.
There’s no need to panic. A quick call or app confirmation with your bank will usually solve this issue within minutes. And once your account has been verified, future purchases usually go through smoothly.
Generally, buying gift cards with a credit card is fast and easy. There are only a few special circumstances where problems may arise. Store-specific cards are less likely to run into these problems, but if you do want to buy prepaid Visa or MasterCard gift cards, make sure you’re aware of your bank’s rules.
Where can you buy gift cards with credit?
When it comes to buying gift cards with credit, you have lots of options. Here are some of the most common places that will easily accept credit cards for gift card purchases:
In-store
Lots of everyday retail locations sell gift cards and are set up to allow you to pay with a credit card. Grocery stores are especially popular because they often carry a wide selection of store-specific cards. Along with their own cards, they may also carry cards for big retailers like Amazon, Starbucks, Apple, and other popular companies.
Sometimes, you’ll also find gift cards sold at gas stations, though they usually have a smaller selection than you would find at a big grocery store.
Online retailers
You can also buy a gift card directly from a retailer’s website. This is a great option if you want to send a card to someone who doesn’t live close to you. Many retailers allow digital gift cards that can be emailed instantly, so you know your gift will arrive on time.
In addition to that, there are also dedicated online gift card marketplaces. These let you purchase multiple brands in one place using a credit card, and often have instant delivery options.
Digital wallets and apps
Digital wallets and mobile apps are really useful for purchasing last-minute gifts. Many apps allow you to buy and store digital gift cards instantly. That means you don’t need to visit a store or wait for shipping to treat someone with a gift card.
Using a credit card for gift card purchases
Buying a gift card with a credit card is safe, easy, and convenient. Even better, it can give you substantial rewards and an additional layer of security and protection.
Most of the time, you’ll have no problem buying a gift card with a credit card. However, if you’re buying a prepaid card, it’s a good idea to double-check for activation fees and whether your credit card will treat them as a cash advance.
Gift cards remain a popular way to give and receive a gift. A little bit of planning means you can easily buy gift cards with your credit card wherever you shop.
FAQs
Does buying a gift card count as a cash advance?
Buying a store-specific gift card doesn’t count as a cash advance. However, sometimes buying a prepaid Visa or MasterCard might be seen by your credit card company as a cash advance and expose you to a credit card cash advance fee. It’s always a good idea to check your cardholder agreement or call your credit card company before you purchase one of these cards, so you know what you’re getting into.
Can I buy a prepaid Visa with a credit card?
Yes, you can purchase gift cards with credit, including a prepaid Visa or MasterCard. However, your credit card company may consider this a cash advance, which will open you up to a credit card cash advance fee and interest on day one with no grace period. Make sure you understand how your credit card views these cards before you buy one.
Will I get reward points for buying gift cards?
Usually, yes. In fact, some credit cards give you extra points for spending in certain categories. So, for instance, if you get extra cash back for grocery purchases, you can buy gift cards at the grocery store and get money back for them.
Is there a limit to how many gift cards I can buy?
Some stores have limits on how many cards you can buy in a single transaction. This number varies from one store to the next. Some banks may also flag transactions as fraud if you try to buy a lot of gift cards at one time.