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Can you buy gift cards with a credit card — and should you?

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Do you need a last-minute gift? Or perhaps you have someone on your list who is impossible for buy for. Whatever the case may be, you'll likely end up buying a gift card during the upcoming holiday season. In fact, the Blackhawk Network reported that 43% of holiday spending will be spent on the purchase of gift cards.

To make the cost more manageable or earn rewards, you may be thinking about using credit to buy a gift card. But can you buy gift cards with a credit card? The answer is yes, but there are some key details you should consider before swiping your card at the register.

When talking about gift cards, it's important to know what type of card you're dealing with first. There are two main categories:

  • Retail: A retail card is a gift card to a store or restaurant. These cards, often called merchant cards, do not have service or activation fees.

  • Prepaid Network: A prepaid network card is issued by credit card networks, such as Visa or Mastercard. They typically charge service fees at the time of purchase, and the fees range from $2.95 to $5.95 per purchase. Unlike retail cards, which can only be used at select retailers or restaurants, prepaid network cards can be used anywhere Visa or Mastercard is accepted.

Retail and prepaid network gift cards can be purchased as physical cards or in digital form.

If you're the type of person who rarely carries cash, the idea of using a credit card for gift card purchases can be appealing. Luckily, you can use a credit card to purchase both prepaid network cards and retail gift cards.

However, some retailers have limitations on the number of cards you can purchase or the dollar amount you can put on the gift card.

For example, maybe you want to use your Southwest Rapid Rewards? Premier Credit Card* to purchase a gift card with the airline for a loved one, while earning 3x points on your purchase. You’ll need to keep in mind that if you're purchasing a gift card for flights through Southwest Airlines, the maximum purchase amount via credit card is $1,000 per day.

Restrictions vary by company, so check with the selected retailer to find out if there are any limits on gift card purchases.

*The information for the Southwest Rapid Rewards Premier Credit Card has been collected independently by Yahoo Finance. The card details on this page have not been reviewed or provided by the card issuer.

You can use a credit card to purchase gift cards. But is it a good idea? There are some definite advantages to this strategy:

Credit cards make shopping easy. Instead of having to go to a physical store or taking out cash from an ATM, you can use your credit card to purchase gift cards from your phone or laptop.

With some credit cards, you can qualify for discounts on gift card purchases. For example, if you have a Target RedCard, you can get 5% off purchases of gift cards that can be redeemed at theme parks, restaurants and stores.

Although some cards exclude gift card purchases from rewards, that's not the case for all credit cards. Depending on the terms and conditions of your credit card, you could earn valuable cash-back rewards, airline miles or points on your gift card purchases. You can redeem those rewards for statement credits, hotel accommodations, flights, or other gift cards.

Holiday shopping can be expensive. If you need to buy several cards at once, you may not have enough money in the bank to cover the cost outright. Using a credit card allows you to spread out the cost over several weeks or months, making it more affordable.

Important: Going into debt for the holidays is never recommended; if you do use a credit card for your purchases, aim to pay off the statement balance in full by the due date to avoid interest charges.

Before using your credit card to buy a gift card, consider these drawbacks:

Some credit cards explicitly exclude gift card purchases from their rewards programs. For example, you won't earn cash-back rewards on gift card purchases using the Citi Double Cash? Card, a flat cash-back credit card that typically earns up to 2% back on every purchase.

If you can't earn rewards on your purchase, that restriction may make using a credit card less appealing.

With some credit cards, new cardmembers can earn a bonus if they meet the card's spending requirement within the first few months of opening an account. But with some cards, such as the American Express? Gold Card, gift card purchases don't count as qualifying purchases toward the new cardmember bonus. You'll have to meet the spending requirement through other transactions to qualify for the bonus offer.

How gift card purchases are handled varies by credit card, but some cards — particularly store-branded credit cards — treat gift card purchases as cash advances. You'll have to pay a higher annual percentage rate (APR) and cash advance fees on the gift card amount.

For example, the Sephora Visa? Credit Card classifies gift card purchases as cash advances, so you'll have to pay either $10 or 3.00% of the gift card purchase in cash advance fees, whichever is greater. And you'll have to pay a higher cash advance APR of 32.99%.

Using a credit card to buy a gift card can be expensive if you don't pay off the statement balance in full. As of August 2023 — the last available data — the average APR for credit cards was 22.17%. If you carry a balance after purchasing a gift card, you could end up paying significantly more in interest due to the high APR.

If your card classifies gift card purchases as cash advances, the APR can be a more significant drawback. With cash advances, the APR applies from the transaction date, even if you pay off the card in full by the statement due date.

One way to avoid the drawbacks of using a credit card to buy gift cards is to redeem your credit card rewards for gift cards instead. Many cards allow you to redeem your cash back or points for gift cards to major retailers and restaurant chains.

Here are just a couple of examples of rewards credit cards that allow gift card redemptions:

As an added benefit, some retailers will give you a bonus for this redemption method; for example, you can get a $25 gift card with just $20 of rewards.

Can you buy gift cards with a credit card? Yes, but it may not be the best idea. Although you could earn cash back or rewards, you may incur costly fees and pay a higher interest rate. Before using your card, review your cardmember agreement to find out how gift card purchases are treated, whether you can earn rewards on your purchase and what fees apply.


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