It’s a common question for those savvy with credit card rewards: Can You Buy Gift Cards With A Credit Card? The short answer is yes, it’s generally allowed. However, like many things in the world of credit card rewards, there are nuances and considerations to keep in mind to maximize benefits and avoid potential pitfalls.
Buying gift cards with a credit card, especially at places like grocery stores, can be a strategic move. Many credit cards offer bonus rewards points or cash back for purchases made in specific categories, and grocery stores often fall into these bonus categories. This is where the appeal of buying gift cards comes in – it allows you to effectively extend your bonus category spending.
However, before you load up your shopping cart with gift cards, there are a few key aspects to understand:
Understanding Activation Fees and Card Types
One of the first things you’ll encounter when buying gift cards, particularly open-loop gift cards (like Visa or Mastercard gift cards), is the activation fee. As mentioned in the original discussion, these fees can eat into the value proposition if you’re not careful. A $4.95 activation fee on a $15 Mastercard gift card significantly reduces its effective value.
To mitigate this, consider these strategies:
- Variable Load Gift Cards: Opt for variable load gift cards that allow you to load up to $500. While they still have activation fees, spreading the fee over a larger value makes it a smaller percentage of your total spend – around 1% for a $5-$6 fee on a $500 card.
- Higher Denomination Cards: If variable load isn’t an option, aim for higher denomination cards like $200 or more to reduce the percentage impact of the activation fee.
- Closed-Loop Gift Cards: These are retailer-specific gift cards (e.g., for a particular store or restaurant) and typically do not have activation fees. If you know where you’ll be spending the money, these can be a fee-free alternative.
Various gift cards displayed at a store.
Navigating Store Policies and Credit Card Acceptance
While it’s generally permissible to buy gift cards with credit cards, store policies can vary significantly, and this is often location-dependent. Some grocery stores may have policies that restrict credit card purchases for gift cards, sometimes requiring cash or debit card payments instead.
Experiences can differ greatly even within the same chain. As highlighted in the original text, one Safeway location might prohibit credit card funding for gift cards, while another just a few miles away might allow it after a simple ID verification. It’s wise to check the policy at your local store or even try a small gift card purchase to test the waters.
Using Gift Cards Effectively
Gift cards, especially prepaid cards, can sometimes present minor inconveniences when it comes to spending them down to the exact cent.
- Restaurants: Restaurants are generally accommodating, allowing you to specify the exact amount to be charged to the gift card and pay the remainder with a credit card.
- Gas Stations: Using gift cards at the pump can be problematic due to pre-authorization holds that can be significantly higher than your actual purchase amount ($75-$100 holds are common). It’s often better to pay inside at the counter and specify the exact amount you want to use from the gift card.
A person paying with a credit card at a grocery store checkout.
Maximizing Rewards and Staying Under the Radar
If your goal is to maximize credit card rewards by purchasing gift cards, keep these points in mind:
- Grocery Category Bonus Caps: Be aware of any spending caps on bonus categories. As mentioned in the original example, someone was able to spend close to $1000 in “groceries” (including gift cards) within a month and still receive the bonus rewards, staying under the $1500 cap.
- Spread Out Purchases: For large gift card purchases, consider breaking them into smaller transactions and spreading them across different billing cycles. This can help avoid triggering any fraud alerts or raising suspicion with your credit card issuer.
Credit score badges showing good credit scores from Equifax, TransUnion, and Experian.
Conclusion
Yes, you can typically buy gift cards with a credit card, and it can be a valuable strategy for maximizing credit card rewards, particularly in bonus categories like grocery stores. However, be mindful of activation fees, varying store policies, and the slight complexities of using prepaid gift cards. By understanding these factors and employing smart strategies like choosing variable load cards and being aware of store policies, you can effectively leverage gift card purchases to enhance your credit card rewards game.
