What credit cards should you use to purchase gift cards?

Dec 20, 2019

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Editor’s note: This post has been updated with new card details. 

We’ve all been there — you need a gift for your friend, family member or spouse, but you have no idea what to get. So you take the easy way out and buy a gift card to a popular retailer.

While it’s rarely a good idea to use credit card rewards to buy a gift card, you should maximize your gift card purchases by using the right credit card. Luckily, there are plenty of cards that offer bonus rewards at places like gas stations, grocery stores, supermarkets and office supply stores that sell gift cards to just about anywhere.

Best Credit Cards for Gift Cards

The information for the Ink Business Cash has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

In This Post

Comparing the Best Credit Cards for Gift Cards

Category bonus Return on Spend (based on TPG Valuations) Current Bonus
5% cash back (or 5x points) on the first $25,000 in spend at office supply stores each account anniversary year 5%-10% $500 or 50,000 points after you spend $3,000 on purchases in the first three months
4x cash back on up to $25,000 per calendar year at U.S. supermarkets; then 1x 8% 35,000 points after you spend $4,000 in purchases in the first three months. Terms apply.
6% cash back on up to $6,000 per calendar year at U.S. supermarkets; 3% back at U.S. gas stations 6% $250 statement credit after you spend $1,000 in purchases in the first three months. Terms apply.
3% cash back on the first $2,500 per quarter in combined purchases in category of your choosing 3% $200 cash bonus after you spend $1,000 in the first 90 days
3x on eligible transit, including gas stations 6% 30,000 points after you spend $2,000 in purchases in the first three months. Terms apply.

 

Let’s take a look at the details on each of our top picks.

Chase Ink Business Cash

Annual fee: $0

Bonus: Earn $500 (or 50,000 points) after you spend $3,000 in the first three months (worth up to $1,000 according to TPG valuations).

Why it’s great for gift card purchases: You’ll earn 5% back on office supply store purchases (on up to $25,000 in annual bonus spend). Office supply chains such as Staples are known for having a large selection of gift cards available for purchase, including many retailers that won’t earn rewards with other cards (meaning gift cards are the best way to earn rewards on those purchases).

That becomes even more lucrative if you also have a Chase Sapphire Preferred Card, Chase Sapphire Reserve or Chase Ink Business Preferred Credit Card. Then your 5% back turns into 5x Ultimate Rewards points that can be redeemed at a much higher value than cash back. The information for the Ink Business Preferred has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Check out our full Chase Ink Business Cash review.

APPLY HERE: Chase Ink Business Cash

Amex Gold Card

(Photo by Isabelle Raphael / The Points Guy)
(Photo by Isabelle Raphael/The Points Guy)

Annual fee: $250 (see rates and fees)

Bonus: 35,000 points after you spend $4,000 in the first three months (worth $700, according to TPG valuations).

Why it’s great for gift card purchases: You’ll earn 4x on the first $25,000 spent at U.S. supermarkets each calendar year; then 1x point, which comes out to an 8% return. Supermarkets are another great place to pick up a variety of gift cards. Just remember that superstores like Walmart and Target are not included in the supermarket bonus category.

With a higher spending threshold for its bonus, you can use gift card purchases to help meet that spending requirement while still earning rewards.

Check out our full Amex Gold Card review.

APPLY HERE: Amex Gold Card

Amex Blue Cash Preferred

Annual fee: $95 (see rates and fees)

Bonus: $250 statement credit after you spend $1,000 in the first three months.

Why it’s great for gift card purchases: You’ll earn 6% cash back on the first $6,000 spent at U.S. supermarkets each calendar year (then 1%) and 3% back at U.S. gas stations. Gas stations also sometimes offer a solid gift card selection. The Blue Cash Preferred is a cash-back credit card, which is less valuable than Membership Rewards. But if you are a fan of cash-back rewards, 6% back on gift cards is as good as it gets.

Check out our full Amex Blue Cash Preferred Card review. 

APPLY HERE: Amex Blue Cash Preferred

Bank of America Cash Rewards credit card

Annual fee: $0

Bonus: Earn $200 cash bonus after spending $1,000 in the first 90 days.

Why it’s great for gift card purchases: With the Bank of America Cash Rewards card, you can choose which category earns 3% back back. This list includes drug stores, online shopping and home improvement stores — all of which are places you can find gift cards. You’ll also earn 2% back on grocery stores and wholesale clubs. There is a $2,500 cap on combined rewards spending per quarter (then 1%).

If you qualify for the Bank of America Preferred Rewards program, you can actually earn anywhere from 3.75% back to 5.25% back on your chosen bonus category, and 2.5% to 3.5% at grocery stores and wholesale clubs. Considering this card comes with no annual fee, that’s a great cash-back return for gift cards.

Check out our full Bank of America Cash Rewards Card review.

APPLY HERE: Bank of America Cash Rewards credit card

Why should I use gift cards?

The most obvious reason to buy gift cards is to use them as a gift to a friend or loved one, but there are also reasons why buying gift cards for yourself might be a good idea.

Gift cards operate like cash at most retailers, so using the gift cards themselves won’t earn rewards. So, you might be asking why I would suggest purchasing them to use. Wouldn’t it be better to use a rewards credit card for your retail purchase to earn rewards?

Unfortunately, most retailers don’t fall into common bonus categories, which means you’d likely only end up with 1% or 1x on those purchases. But gift cards can be bought at locations that do earn rewards. If you buy a gift card to Nordstroms or Bass Pro Shop at Staples with your Ink Business Cash, that’s 5%/5x earned on those purchases instead of the 1%/1x you would earn otherwise.

Should I use rewards to buy gift cards?

Many credit cards allow you to redeem your rewards for gift cards, but it is almost never a good idea. When redeeming points or miles, you want to make sure that you’re getting a solid redemption value from each point/mile, and gift cards rarely give you the best value for your rewards.

When it comes to transferable currencies like Amex Membership Rewards or Chase Ultimate Rewards, you’re typically only getting between .7 cents to 1.1 cents of value from each point. Considering you can redeem Chase points at 1.25 or 1.5 cents each through the Chase travel portal or potentially at a much higher rate when you transfer to an airline partner, it doesn’t make sense to use your Ultimate Rewards balance to stock up on gift cards. Amex points are also easily worth more than 1.1 cents each when you maximize transfer partner redemption options.

(Summer Hull / The Points Guy)
(Photo by Summer Hull/The Points Guy)

There is an exception to this, though. Some credit cards offer fixed-value rewards, such as the Wells Fargo Propel American Express® card. With fixed-value credit cards, your rewards are worth the same amount no matter how you redeem them. So in that case, you could get the same value from buying gift cards as you would travel. Just keep in mind that if you’re using your rewards to buy the gift cards, you won’t get to reap the benefits of bonus rewards on your purchase. The information for the Wells Fargo Propel has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

Using a portal to redeem gift cards

Buying gift cards is kind of like buying cash for a certain retailer, which means you can lose out on rewards when you redeem the gift cards. However, there is a way to double-dip on gift card rewards — online shopping portals.

Let’s say you use your Amex Gold to earn 4x on Ulta Beauty gift cards bought at your local U.S. supermarket (on the first $25,000 in purchases each calendar year; then 1x). You can then redeem that gift card at Ulta.com through a shopping portal (at the time of publication, the AAdvantage portal was offering 3x miles on Ulta purchases). So where you would have gotten no rewards from restocking your favorite concealer and haircare products by buying in-store, you could get 4x Membership Rewards points and 3x AAdvantage miles.

Bottom line

Gifts cards make easy, excellent gifts for picky friends and family members, and they can also help you maximize your own rewards and credit card strategy. Just make sure you’re using the best credit card to buy those gift cards, and always remember to use an online shopping portal whenever possible to redeem those gift cards.

Featured image by Richard Levine/Corbis via Getty Images.

For rates and fees of the Amex Gold Card, please click here.
For rates and fees of the Amex Green Card, please click here.
For rates and fees of the Blue Cash Preferred Card, please click here.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.