Buying gift cards with a credit card is a common practice that offers several benefits, but it’s also essential to be aware of the potential drawbacks and restrictions. In this comprehensive guide, we’ll explore the ins and outs of purchasing gift cards with a credit card, including when it makes sense to do so, the potential pitfalls, and the best credit cards for maximizing rewards on gift card purchases.
Why Buy Gift Cards With a Credit Card?
There are several compelling reasons why you might want to consider buying gift cards with a credit card:
- Earn Rewards on Your Purchase: One of the primary advantages of using a credit card to buy gift cards is the ability to earn rewards on your purchase. Whether you’re earning cash back, points, or miles, purchasing gift cards with a credit card can help you rack up rewards faster. This is especially beneficial if you plan to give the gift card as a present or use it for future purchases at the associated retailer.
- Maximize Bonus Categories: Many credit cards offer bonus rewards in specific spending categories, such as grocery stores, gas stations, or dining. By strategically purchasing gift cards in these bonus categories, you can effectively “expand” the categories and earn more rewards on purchases you would have made anyway. For example, if your credit card offers 5% back on grocery store purchases, you could buy gift cards for restaurants, and retail stores, or even travel at the grocery store to maximize your rewards.
- Take Advantage of Rotating Categories: Some credit cards, like the Chase Freedom Flex℠ and Discover it® Cash Back, offer rotating quarterly bonus categories. By purchasing gift cards in these bonus categories, you can effectively “save up” for future purchases and earn more rewards in the process.
- Meet Minimum Spending Requirements: Many credit cards offer lucrative sign-up bonuses, but only after you meet a minimum spending requirement within a specified timeframe. Purchasing gift cards can be an easy way to help you meet those spending requirements and unlock those valuable bonuses.
- Earn Discounts or Promotions: Occasionally, retailers or credit card issuers offer discounts or promotions on gift card purchases. By taking advantage of these offers, you can effectively save money on future purchases or gifts.\
When Not to Buy Gift Cards With a Credit Card
While there are certainly benefits to buying gift cards with a credit card, there are also situations where it might not be the best idea:
- Restrictions on Earning Rewards: Some credit card issuers explicitly exclude gift card purchases from earning rewards. Check your card’s terms and conditions before making a purchase to avoid any surprises.
- Cash Advance Fees: In some cases, credit card issuers may code gift card purchases as cash advances, which can result in hefty fees and higher interest rates. This is more common with certain types of gift cards, such as prepaid debit cards or open-loop gift cards issued by financial institutions.
- Gift Card Purchase Limits: Some retailers impose limits on the number or value of gift cards you can purchase with a credit card. These limits are often in place to prevent fraud or abuse.
- Tie-Up of Funds: When you purchase a gift card, you’re essentially tying up those funds for future use at a specific retailer. This can limit your spending flexibility and potentially lead to waste if the gift card goes unused.
- Lack of Consumer Protections: Gift cards generally lack the same consumer protections as credit cards, such as fraud liability protections, purchase protection, or extended warranties. Using a credit card directly for purchases can provide more safeguards.
Best Credit Cards for Buying Gift Cards
If you’ve decided to pursue gift card purchases with a credit card, it’s essential to choose a card that maximizes your reward potential. Here are some of the best credit cards for buying gift cards:
- Blue Cash Preferred® Card from American Express: The Blue Cash Preferred® Card from American Express is an excellent choice for buying gift cards at U.S. supermarkets, as it offers 6% cash back on up to $6,000 in annual spending at U.S. supermarkets (then 1%). Many supermarkets sell a wide variety of gift cards, making this card a great option for maximizing rewards on those purchases.
- Chase Freedom Unlimited®: The Chase Freedom Unlimited® is a solid pick for earning rewards on gift card purchases at drugstores, as it offers 3% cash back on purchases in that category. Additionally, it provides 5% cash back on travel booked through Chase Ultimate Rewards® and 3% back on dining and select streaming services.
- Ink Business Cash® Credit Card: For small business owners or entrepreneurs, the Ink Business Cash® Credit Card is an excellent choice for buying gift cards at office supply stores. It offers 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone services each account anniversary year.
- Discover it® Cash Back: The Discover it® Cash Back card is a great option for those looking to take advantage of rotating quarterly bonus categories. These categories often include retailers that sell gift cards, such as Amazon.com, grocery stores, or gas stations. Discover will match the cash back you earn after the first year, effectively doubling your rewards.
- Target RedCard™ Credit Card: If you frequently shop at Target, the Target RedCard™ Credit Card could be a smart choice for buying gift cards. It offers a 5% discount on all Target purchases, including gift cards for other retailers sold at Target stores.
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Conclusion
Buying gift cards with a credit card can be a smart move if you approach it strategically. By taking advantage of bonus categories, rotating rewards, and promotional offers, you can maximize your rewards earnings on these purchases. However, it’s crucial to be aware of potential pitfalls, such as restrictions on earning rewards, cash advance fees, and gift card purchase limits.
Ultimately, the decision to buy gift cards with a credit card should be based on your specific spending habits, credit card rewards program, and the terms and conditions of your card. If done thoughtfully, this practice can be an effective way to earn more rewards and save money on future purchases or gifts.
Remember to strategically include links throughout the article to relevant credit card pages, retailer websites, and other helpful resources. Additionally, consider including a section on responsible credit card usage and the importance of paying off balances in full to avoid interest charges that could negate any rewards earned.
Frequently Asked Questions (FAQs)
Can you purchase a Visa gift card using a credit card?
Yes, you can generally purchase Visa gift cards with a credit card, but be aware that some issuers may code these transactions as cash advances, which can result in additional fees and higher interest rates.
Can you buy a gift card from Walmart with a credit card?
Absolutely. Walmart allows customers to purchase gift cards for various retailers with a credit card, either in-store or online.
Can you buy a prepaid card with a credit card?
While it’s possible to buy prepaid cards with a credit card, it’s essential to exercise caution, as these purchases are more likely to be coded as cash advances. Always check with your credit card issuer beforehand to understand their policies.
Can you earn credit card rewards on gift card purchases?
It depends on your credit card’s terms and conditions. Some cards explicitly exclude gift card purchases from earning rewards, while others allow you to earn rewards on these transactions. Be sure to review your card’s terms before making a purchase.
What are the limits on buying gift cards with a credit card?
Limits on gift card purchases with credit cards can vary by retailer. Some may have limits on the number of gift cards you can buy or the total value you can purchase. It’s always a good idea to check with the retailer beforehand to understand their policies.
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