Is it legal to buy gift cards with credit card?

Gift Cards and Credit Cards: A Convenient Combination, But Tread Carefully

Gift cards have become ubiquitous, the go-to solution for birthdays, holidays, and those “I don’t know what to get you” moments. Their convenience is undeniable, and increasingly, people are reaching for their credit cards to purchase them. But is it legal to buy gift cards with a credit card? Absolutely. However, while perfectly legal and often tempting, using a credit card to buy gift cards requires a careful consideration of the potential benefits and, more importantly, the drawbacks.

The appeal is clear. Credit cards offer immediate purchasing power, allowing you to buy a gift card even if your current cash flow is a little tight. They also often come with enticing reward programs. Accumulating points, miles, or cashback on a large gift card purchase can seem like a savvy way to maximize your spending. Some cards even offer specific bonus rewards for purchases made at certain retailers, potentially amplifying the savings if the gift card is for that particular store.

However, the siren song of rewards can be deceiving. The potential downsides can easily outweigh the benefits if you’re not careful.

Here’s where the caution light needs to flicker:

• Debt Accumulation: This is the biggest risk. Putting a gift card purchase on your credit card adds to your outstanding balance. If you can’t pay that balance in full by the due date, you’ll start accruing interest. Those seemingly lucrative rewards can quickly be eaten up by interest charges, turning your “smart” purchase into a costly one.
• Cash Advance Implications: While increasingly rare, some credit card companies may classify gift card purchases as a cash advance. Cash advances often come with higher interest rates and fees than regular purchases, completely negating any reward potential and leading to significant debt. Always check your credit card agreement to be sure about how your issuer treats gift card purchases.
• Potential for Overspending: The convenience of using a credit card can lead to overspending. Because you’re not immediately feeling the pinch of the money leaving your account, it’s easy to buy more gift cards than you can actually afford to pay back. This can spiral into further debt and damage your credit score.
• Security Risks: While credit cards offer some protection against fraud, purchasing gift cards, especially in large quantities, can sometimes trigger security alerts. This can lead to your account being temporarily suspended or require verification processes that add inconvenience. Furthermore, if a gift card is lost or stolen after purchase, recovering the value can be difficult, even if you have the credit card transaction record.
• Limited Consumer Protection: Unlike purchasing goods directly with your credit card, gift card purchases might offer limited consumer protection. For example, if the retailer goes bankrupt, the gift card may become worthless.

So, when is it okay to buy gift cards with a credit card?

The answer depends entirely on your financial discipline and ability to manage your credit responsibly. If you can confidently say “yes” to the following questions, then using your credit card to purchase gift cards might be a viable option:

• Can I pay off the entire balance in full by the due date?
• Am I aware of any potential fees or higher interest rates associated with this type of purchase?
• Am I buying only the amount of gift cards that I need and can comfortably afford?

Ultimately, the decision to use a credit card for gift card purchases is a personal one. Weigh the potential benefits against the risks, understand the terms and conditions of your credit card agreement, and prioritize responsible spending habits to avoid falling into debt. It’s about making an informed choice, not just chasing rewards.