Can I Use Gift Cards to Pay My Credit Card Bill?

Gift cards are a popular gift item for any occasion – birthdays, holidays, graduations, etc. Most people have received at least a few gift cards over the years. But when those gift cards go unused, you may wonder if you can put the balance towards paying down your credit card bill.

The short answer is no, you typically can’t directly pay a credit card bill with a gift card However, with a few extra steps, you can convert the gift card funds into cash to make a payment. In this article, we’ll explore the options for attempting to pay credit card bills with gift cards.

Overview of Credit Card Payment Methods

First, let’s look at the standard ways credit card companies accept payments:

• Checks or money orders by mail
• Electronic bank transfers and online payments
• Debit card payments over the phone or online
• Cash payments at a bank branch

When reviewing your credit card statement or account website, you likely won’t see gift cards listed as a payment method. Credit card companies have no way to directly process gift card information.

So while it would be convenient, you can’t just enter a gift card number and PIN when making an online payment. But that doesn’t mean gift cards can’t be used indirectly

Challenges of Using Gift Cards for Credit Card Payments

There are a couple key reasons why gift cards don’t work for direct credit card bill payment

• Incompatible payment processing – Credit cards use card networks like Visa and Mastercard to handle transactions. Gift cards operate on closed-loop systems outside of major card networks. So there’s no intersection that allows gift card funds to go directly to credit card companies.

• No way to convert to cash – Credit card companies need to receive actual money, not just gift card balances. But most gift cards don’t offer a way to redeem the remaining value for cash.

Gift cards are essentially store credit, not cash equivalents. The card issuers don’t want you trading in gift cards without buying their products.

Strategies to Use Gift Cards for Credit Card Payments

While you can’t directly apply gift card funds to a credit card, there are some indirect methods to convert the balances to cash that you can then use to pay your bills. It takes a few extra steps, but it is possible.

Reselling Gift Cards

One option is to resell or trade in your unwanted gift cards to convert the balance to cash. Here are some potential methods:

• Gift card resale sites – Online sites like CardCash, Raise, and GiftCardGranny let you sell your cards at a discounted rate, then receive payments via check, direct deposit, or PayPal.

• Gift card exchange kiosks – Many grocery stores have kiosks that let you swap gift cards for cash. You’ll get less than the full balance, but it provides instant cash.

• Peer-to-peer sales – Sites like Craigslist, Facebook Marketplace, and eBay allow you to advertise your gift cards for sale directly to other users.

Once you secure cash from reselling your gift cards, you can then use those funds to pay your credit card like normal.

Using Gift Cards for Everyday Purchases

If your gift cards are for restaurants, stores, or other places you routinely shop, you can use them for your regular spending. Then redirect the cash you would have spent to make an extra payment on your credit card.

For example, let’s say you have a $50 gift card for Home Depot. You planned to buy $50 worth of home supplies there this month anyway. Rather than spending the cash from your budget at Home Depot, use the gift card instead.

Take that $50 in cash you saved and make an extra payment on your credit card over and above your minimum. This allows you to spend down gift cards and pay more than the minimum due on your credit card each month.

Liquidating Gift Cards with Money Orders

One lesser known option is using gift cards to purchase money orders that you can then deposit into your bank account. Here are the basic steps:

1. Buy a money order at a post office or retailer using funds from your gift card.

2. Use mobile deposit to digitally deposit the money order into your checking account.

3. Transfer cash from your bank account to make a credit card payment.

There may be small fees involved depending on where you purchase the money order, but it’s a direct way to liquidate gift cards into bank account funds usable for paying your credit card.

Should You Pay Credit Cards with Gift Cards?

Before rushing off to liquidate all your unused gift cards, let’s review some key considerations:

• You’ll likely lose a percentage of the balance when reselling gift cards or buying money orders. That reduces the full value.

• Using gift cards for everyday spending only frees up cash you already budgeted. It doesn’t generate new money to pay down debt.

• The process takes significant time and effort compared to regular payment methods.

• Legitimate gift card reselling sites help avoid scams, but there are still risks buying and selling online.

While it is possible to use gift cards for credit card payments indirectly, assess whether the juice is worth the squeeze for your specific situation. Keep in mind that credit card rewards often incentivize regular spending on the card.

Strategic Ways to Leverage Gift Cards

If you receive gift cards for places you don’t shop at often, here are some smart strategies to make the most of them beyond just credit card payments:

• Regift unwanted gift cards to friends and family who may use them.

• Sell for over 80% of the value to maximize your cashback.

• Purchase universal gift cards you can use anywhere if reselling the original cards.

• Donate partially used gift cards to charity to write off the remaining balance.

• Use gift cards strategically to keep your cash free for paying off higher interest debt.

The key is avoiding letting gift cards go to waste. Even if you can’t use them directly for credit card payments, you have options to generate value.

Creative Methods to Explore at Your Own Risk

This article has focused on legitimate and low risk methods to convert gift cards to cash for credit card payments. However, there are some extremely creative ideas mentioned on blogs and forums that we feel obligated to warn against attempting:

• Depositing gift cards directly into ATMs to receive cash back – Technically bank fraud if not your own card!

• Purchasing money orders with gift cards, then returning the money orders for cash – Very high risk of legal consequences and fines.

• Buying prepaid debit cards with gift card funds, then withdrawing cash advances – Results in hefty fees and raises red flags.

While these techniques may technically work in rare cases, they are forms of money laundering and fraud. Stick to reselling gift cards through legitimate channels only to remain on the right side of the law!

The Bottom Line

At the end of the day, gift cards and credit card payments don’t directly mix. Credit card companies can’t process gift card numbers or PINs. And most gift cards are not redeemable for cash.

However, with some patience and effort, you can take your unused gift cards and indirectly turn them into cash to pay down credit card bills through resale sites, exchanges, or money order purchases.

Just don’t expect to liquidate gift cards at full value or use them seamlessly like cash. Evaluate whether the time investment makes sense for your personal situation. Often letting gift cards accumulate can create a nice rainy day fund to tap into.

So while paying credit cards directly with gift cards isn’t feasible, you can leverage unused gift card balances creatively. Weigh your options and pick the best approach. Happy gifting and strategic spending!