By Laurel Nelson-Rowe | American Express Credit Intel Freelance Contributor
7 Min Read | December 20, 2019 in Cards
As the stigma of giving gift cards fades into history along with retiring baby boomers, Americans are purchasing more and more gift cards every year. U.S. gift card purchases rose from $91 billion in 2010 to $160 billion in 2018.1 And since we also love our “plastic,” every month thousands ask, “Can you buy gift cards with a credit card?”
Yes, you can—most of the time.
Some merchants do exercise their right to refuse letting you buy a gift card with a credit card, or add restrictions or other conditions—often, to protect themselves from potential fraud. So in the end, whether or not you can buy a gift card with a credit card isn’t a simple yes or no. It’s more like, generally yes, sometimes no—and often hard to determine.
As you compile your holiday, birthday, anniversary, or other gift-card list, here are some things worth knowing about buying gift cards with a credit card.
Gift cards are characterized in the retail industry as “closed loop” or “open loop.” The distinction is important because buying a closed-loop gift card with a credit card is generally easier than buying the open variety—at least in my experience. Closed loop means the gift card can be used only at the store or brand issuing them. Open loop cards, typically from major credit card companies or financial institutions, can be used virtually anywhere, online or in store—but you’ll usually incur purchase fees that range from $2.95 to $6.95, depending on the value of the gift card.
Both closed and open loop gift cards generally can be purchased with a credit card, but retailers make it easier to buy their own closed loop cards. In my explorations for this article, retailers usually made their own store brand gift card available for online purchase, but I often had to go into one of that retailer’s real-world stores to buy other gift cards—with one major exception, described below. So, it can make a lot of sense to think through where your intended recipient shops, and the brands they like or dislike. That might help you zero in on a closed loop gift card you can easily buy with your credit card.
Beyond that, though, in-store and online merchant policies on gift card purchases vary widely, and the terms and conditions can be tough to find. I experienced this first-hand when trying to find gift card buying information at four nationwide brands: an electronics retailer, two drugstores and a household-name discount department store. On one end of the spectrum, it felt like I could buy online any gift card I could imagine with my credit card. On the other end, only that brand’s gift cards were even mentioned.
At the first national drugstore chain I tried, searching its website for “gift cards” did not even yield a search results page—it took me directly to an offer of closed-loop gift cards from that drugstore in several dollar denominations. But when I went to a physical store in Milwaukee I found racks of other retailers’ cards, specialty cards, and open-loop gift cards on display. The manager told me store policy includes daily gift card purchase limits of $2,000 per person and/or 10 cards, whether you’re buying by cash or credit card. Clerks may ask customers for photo IDs for credit card purchases, and bank-branded cards listed additional fees on their retail packaging.
The bottom line: Online, this drugstore appears to sell—and mention—only its own gift cards. In-store, you can buy its own and myriad other brands’ gift cards with your credit card.
I had a different experience at the second drugstore. Various of its own brand cards were available online for credit card purchase, each with a 3.5% processing fee. Only a handful of selected dollar denominations were available online; other amounts are available in-store. The site featured various third-party cards, from Amazon to Uber—but in nearly all cases, small print stipulated “not sold online … find at store.”
The bottom line: Drugstore 2 sells certain denominations of its own gift cards on its website with an added fee, but most other brands’ gift cards can only be found in stores.
The electronics store’s site had a wide variety of its own gift card and “specialty” (restaurant, retail, travel, entertainment, etc.) gift cards available in various denominations, along with an online FAQ. The site noted if cards were available in-store, online or both, and that yes, in fact you could buy their gift cards with your credit card. A $500 airline card was the highest-value card available online. The online gift card help section noted that no single gift card purchase could exceed $500, and there is a $2,000 per person, per day gift-card buying maximum.
The bottom line: The electronics store site lets you buy a large variety of its own and other brands’ gift cards with your credit card, and specifies whether the card you want is available online or in-store.
Online at the discount department store could you choose from what looked to me like the same very large selection of restaurant, travel, retail, and other specialty cards as you would find in-store, as well as open-loop bank cards, the store’s cards, and co-branded cards. All these gift cards could be bought with your credit card—with purchase fees added to the cards from other brands. The site also listed which cards are available in stores.
The bottom line: The national discount store sells a large variety of its own and other brands’ gift cards online—the latter for an added fee.
There are three more factors to consider as you seek to buy gift cards with your credit card:
Some observers warn to check your credit card terms and conditions for buyer do’s and don’ts that could include rules against certain types of gift card purchases.2 Security is a concern that stops some merchants, especially small businesses, from accepting credit cards for gift cards if they don’t have terminals that read the security chip embedded in most current cards.3 This plays a role because before security chips took hold in 2016, many stores totally refused credit card purchases due to the potential for fraud. Meanwhile, the Federal Trade Commission advises consumers buying gift cards with credit cards to shun auction and some discount sites to avoid gift card scams. It’s best to buy gift cards from “sources you know and trust,” the agency says.4
So, whatever the season or reason, the short answer is “Yes,” you can buy gift cards with a credit card for everyone on your list. But the fuller answer is a cautionary “Yes, and buyer beware …” of many potential restrictions.
2 “Can You Buy Gift Cards With a Credit Card? What You Need to Know,” Credit Card Insider
3 “Chip Credit Cards: EMV, Chip-and-Pin and Chip-and-Signature,” Credit Card Insider
4 “Paying Scammers with Gift Cards,” Federal Trade Commission Consumer Information