If you read other websites that talk about points and miles, you’ll see articles about purchasing gift cards, and you might wonder, “Why? What’s the purpose of using a credit card to buy gift cards?”
Before we get started, know that people who are really into the game will talk endlessly about gift cards. This isn’t one of those deep-dive manufactured spending posts. Instead, here are the basics that will still make sense whether you’re reading this today or years from now.
Types of Gift Cards
There are three main categories of gift cards:
- Store gift cards – These are the most familiar. A retailer issues them for use at their stores, or sells “third-party” cards for other merchants (Amazon, Panera, Netflix, Olive Garden, etc.).
- Open-loop gift cards – These are usually branded as Visa or American Express. You load a set dollar amount that can be spent anywhere those networks are accepted. Because they aren’t tied to a single store, they usually come with an activation fee (for example, a $100 card might cost $103.99).
- Reloadable gift cards – These fall outside the scope of this article, but they exist as prepaid debit products that can be topped up repeatedly.
Now that you know the types, why would you ever buy gift cards to use for yourself?
Maximize Bonus Categories
When you walk through a supermarket, you’ll pass a wall of gift cards for every type of store imaginable. While they’re marketed for gifting, they’re also useful for maximizing credit card bonus categories.
For example: if you need new sneakers, you could buy a store gift card at a grocery store using a card that earns extra points at supermarkets. Instead of earning 1–2 points at a shoe store directly, you could earn 4–5 points per dollar by buying the gift card at the grocery store first.
It’s not limited to supermarkets, either. Drugstores, gas stations, home improvement chains, and office supply stores all sell large racks of third-party gift cards. Match the merchant to a card with a bonus category and you’ll come out ahead.
Gift Card Sales
Sometimes gift cards go on sale. You might see discounts directly from a retailer, through a website, or during holiday promotions where you get a bonus card with purchase. These are essentially instant savings, but don’t stockpile cards you won’t use. It’s easy to let a Buffalo Wild Wings card gather dust for a year if you aren’t careful.
Office Supply Stores
Most people think of Staples or Office Depot as places for printer paper, toner, or office chairs. But with a Chase Ink Business Cash card, they’re also one of the best spots to buy gift cards. That’s because office supply purchases earn 5% back on your first $25,000 of spend per year. Pair it with a premium Chase card like the Sapphire Preferred, and that 5% cash back turns into 5 Ultimate Rewards points per dollar. That’s tough to beat in almost any category.
Visa and Amex Gift Cards
Buying Visa or Amex gift cards is a little trickier. This is where things overlap with manufactured spending, which is a more advanced topic.
Oversimplified, you’d do this to earn more miles—even after paying the activation fee. Here’s an example using a $100 Visa card with a $3.99 fee, purchased on a 5x bonus category card:
- Card cost: $103.99
- Value on card: $100
- Out-of-pocket cost: $3.99
- Points earned: 519 (103.99 x 5)
- Cost per point: $0.0078 (0.78 cents)
At that rate, buying Ultimate Rewards points could make sense. For other programs (like Hilton), it’s a poor value. And scale is the big problem—you only earned 519 points and now you’re stuck with a $100 gift card to use. They’re also poor choices for purchases where you’d want warranty coverage or travel protections.
Sometimes stores waive the activation fee during promotions, which can improve the math, but you’re still tying up cash in gift cards. Unless you’re deliberately doing advanced manufactured spending, dabbling here rarely makes sense long-term.
Meeting Minimum Spending Requirements
Once upon a time, buying gift cards was an easy way to hit minimum spending thresholds for new card bonuses. That’s far less reliable today. Some issuers explicitly exclude gift cards—and American Express is particularly strict, enforcing this through its Rewards Abuse Team (RAT).
Purchases to meet the spend requirement do NOT include fees or interest charges, balance transfers, cash advances, purchases of traveler’s checks, purchases or reloading of prepaid cards, purchases of gift cards, person-to-person payments, or purchases of any cash equivalents.
You may be able to sneak in the occasional card purchase without issue, but loading up thousands of dollars in gift cards is a good way to risk losing your bonus—or worse, your account. Since Amex is its own processor, they know every item you buy. Personally, if I’m working toward an Amex spending requirement, I avoid gift cards altogether.
Final Thoughts
Using a credit card to buy gift cards can be a smart way to pick up extra points on spending you were going to do anyway. It’s not a replacement for signup bonuses, but over time, it’s one of the more reliable ways to keep your balances growing. Like any tool in the travel hacking world, the trick is knowing when it makes sense—and when it doesn’t.
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1 comment
Kinda done with gift cards. Restaurants especially.