When Should I Buy a Gift Card With a Credit Card?

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Million Mile Secrets reader Richard emails with a question:

Quick question.  Please give me a good example when you would buy a Visa gift card with a credit card as opposed to just using the credit card to pay for the item or service?  Thank you.

Buying Gift Cards

There are 2 big reasons why Richard may want to buy Visa, MasterCard or AMEX gift cards at many grocery stores, pharmacies, and gas stations with a credit card.

You can usually put up to $500 on these cards and then use these gift cards like a credit card to buy almost anything else.  There is usually a $4 to $5 fee to buy a gift card.

1.   Complete Minimum Spending for Bonus

Let’s say that you have to spend $3,000 within 3 months to get the 40,000 point (~$400 in travel) on the Barclaycard Arrival Plus® World Elite Mastercard®.

Just 5 days before the 3 month period to complete the minimum spending ends, Richard realizes that he still has to spend $200 to complete the $3,000 spending requirement.

But Richard doesn’t have $200 in expenses!  Sure, he could buy something that he didn’t really need just to get the sign-up bonus.  But you shouldn’t buy stuff just for the sign-up bonus.

In this case, it makes sense for Richard to buy Visa, MasterCard, or AMEX gift cards with a credit card.  And use these gift cards to pay for future purchases such as groceries, dining, etc.

This way, Richard can complete the minimum spending requirement on his Barclaycard Arrival Plus card and get the ~$400 bonus which he can use for any travel expense!

And he has $200 in gift cards which he can use for his regular day-to-day expenses.

2.   Extra Points for Buying Gift Cards

You also get extra bonus points (sometimes called a “category bonus”) when you buy gift cards at grocery stores, drug stores, gas stations & office supply stores with certain credit cards.

In some cases, these extra points are worth the $4 to $5 fee to buy a gift card.

For example, let’s say that you are a business owner and buy gift cards for your employees and customers for the holidays.

You will get 5X Ultimate Rewards points if you buy these gift cards at office supply stores (Office Max/Office Depot, Staples etc.) using your (no longer offered) Ink Bold, Ink Plus or other Chase Ink card.  Ultimate Rewards points can be redeemed for cash, used for travel, and transferred to airline and hotel partners.

5X Ultimate Rewards points for the same gift cards is MUCH better than 1X point elsewhere!

Similarly, Richard would get 2X Membership Rewards points when he buys gift cards at grocery stores and gas stations with his American Express Premier Rewards Gold card.

Note that the terms and conditions of some credit cards say that you won’t get bonus points for gift card purchases.  But that usually refers to purchases of gift cards directly from a bank or financial institution and not when you buy them at a grocery store etc.

Or Richard could get 2x FlexPoints on his highest category spending in groceries, gas, or travel.  So he can use his U.S. Bank FlexPerks® Travel Rewards Visa Signature® card and buy gift cards at gas stations and grocery stores.

Here’s a post on the best grocery store credit cards.

Lose Purchase Protection

Richard should also know that he gets MUCH better purchase protections (ability to return, dispute transactions etc.) when he uses a credit card to buy something (instead of using a gift card).

That’s why it may make sense to sometimes directly use a credit card to buy expensive items such as electronics etc.

Bottom Line

Richard can earn up to 5X more points if he buys Visa Gift cards with certain miles and points credit cards instead of just using his card to pay for an item or service.

However, he may not like the hassle of shuffling around gift cards.  And he may feel that earning extra miles and points is not worth giving up the credit card purchase protections on large purchases.