Published in: Credit Cards | Sept. 20, 2019
By: Lyle Daly
Gift card purchases could be a great way to score extra rewards points, but it depends on your credit card.
Everyone who has a rewards credit card wants to maximize what they earn back. For those who think a little outside the box, this can lead to the idea of buying gift cards to earn more rewards.
The logic behind this strategy is that many credit cards earn a higher bonus rate at specific types of stores, so you could buy a gift card at a store where you’ll earn bonus rewards, and then use the card elsewhere.
Let’s say you have a card that earns five points per $1 at office supply stores and only one point per $1 at grocery stores. You could use that card for a $100 purchase at the supermarket and earn 100 points. Or, you could buy a $100 supermarket gift card for yourself at an office supply store and earn 500 points.
It seems like a smart way to earn more points. The only question is whether it works.
Whether you earn credit card rewards from gift card purchases will depend on the card that you have. Check the terms and conditions to see if they mention gift card purchases not being eligible to earn rewards.
Quite a few card issuers don’t have any language in their terms and conditions prohibiting this, but there are exceptions. The terms and conditions for some (but not all) American Express cards state that gift card purchases are not eligible for rewards. Wells Fargo includes the same language for its credit cards.
However, although it is not expressly prohibited by many card issuers, they may still block you if it seems as if you are abusing the system.
Another question you may have is whether gift card purchases apply towards the minimum amount you must spend to earn a new credit card’s sign-up bonus.
This isn’t a problem with most card issuers. If you’re short on the minimum spending for a sign-up bonus, you can buy gift cards to make up the difference. Just check your card’s terms and conditions first to verify that there’s no language prohibiting this.
Once again, American Express and Wells Fargo are notable exceptions. With their cards, it’s better to stay on the safe side and reach the spending minimum without gift card purchases. Otherwise, they could deny your bonus or claw it back later, which means they remove the bonus amount from your account.
If the card issuer believes that you’re gaming the system, it can close all your accounts and blacklist you from ever opening another account with them in the future.
So what’s considered gaming the system and what’s not? That’s all up to the discretion of the card issuer, but here are two examples to illustrate the difference:
The bottom line is that a gift card purchase here and there won’t be an issue, and it can help you score some extra points. It’s when consumers manufacture large amounts of spending that card issuers take notice and potentially decide to get rid of those clients.
For that reason, you should stick to buying gift cards that you plan to use. The last thing you want is to lose your credit card just because the card issuer believes you were gaming its rewards program.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool brand that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2020
The Ascent. All rights reserved.