Two surveys were released before the holidays, showing Americans use plastic to pay for them: Capital One’s Shopping Research says 64% of Americans purchase gift cards. At the same time, Debt.com’s Holiday Shopping Survey found that 66% planned to go into credit card debt. Those now waking up with a “holiday debt hangover” may wonder: Can I use those gift cards to pay off your credit card balance?
Unfortunately, you can’t directly use a gift card to pay off your credit card balance, even if it is a general gift card like a Visa or Mastercard. Credit card companies typically only accept payments through bank accounts, checks, or using another credit card for a balance transfer.
There are, however, still ways to use those gift cards to help you manage your credit card debt. It depends on your gift card type and using round-about ways to leverage them.
This video explains how in less than three minutes:
Click here for full audio transcript
Gift cards are one of the most popular holiday gifts. In fact, over 64% of Americans planned to purchase a gift card this past holiday season. A Debt.com survey found that 66% of Americans planned to go into debt this holiday season.
This might lead you wonder can you use some of those gift cards you got for the holidays to pay off some of that credit card debt? You can’t directly use gift cards to pay off credit card balances.
Even if it’s a general gift card like Visa or Mastercard that look like debit cards, credit card companies typically only accept payments through bank accounts, checks, or by using a balance transfer credit card. There are still ways to use those gift cards to help you manage your credit card debt.
The method you’ll use will depend on which type of gift card you have. There are two types of gift cards: open loop and closed loop.
Open loop gift cards are the ones you can use almost anywhere like a Visa or Master Card. Some of these cards allow you to withdraw the balance as cash at an ATM. But fees will likely apply or you can use it to buy money orders and then deposit and cash them.
Another option is to link your PayPal or Venmo account and transfer the money to your bank. If those don’t work, use a gift card for everyday items like gas and groceries and that frees up your regular money to tackle the debt. Closed gift cards are less versatile since they can only be used at a specific store. These are cards like Starbucks or Target gift cards. t
There are however still ways you can use them to help pay off your credit card debt. There are third-party websites that will buy your gift card from you.
You won’t get the full value but at least it’s some cash you can use to pay down your debt. If you have gift cards with low balances don’t get rid of them. That’s tossing money away. Cashiers can split payments between multiple cards, helping you use up low balance gift cards. Or if you have multiple cards of the same type you can combine them to simplify your spending.
Whatever you do try to use your gift cards sooner rather than later. Holding on to gift cards for a long period of time can be risky. You can lose and forget them. The store could go out of business or their value can just diminish.
Open loop cards charge inactivity fees after a year of nonuse and they’ll eat away at that balance. If you do plan to use your gift card, make sure you do so wisely. according to Capital One Shopping research, 61% of consumers spend more than a gift card’s value in redeeming them for an average of $31.75 cents more than the card’s value.
Check out Debt.com for more tips on paying down credit card debt. For more news and information subscribe to Debt.com’s YouTube channel, and if you need help getting out of debt or have questions visit Debt.com today.
Options for Open-Loop Cards
An open-loop gift card is a general gift card that can be used almost anywhere. These cards, such as those issued by Visa, Mastercard, or American Express, function like regular debit cards. They can be used at various online and offline businesses wherever the card brand is accepted. This versatility makes them convenient and offers many ways to use the balance to pay off credit card debt.
Withdraw the balance as cash
Some open-loop gift cards let you withdraw the balance as cash at ATMs. You can then use that cash to pay off your credit cards. Here’s how:
- Check the card: See if your card allows cash withdrawals. The gift card website should have that information.
- Find your PIN: It may be located on the card. If not, you can look for it on the card’s website or call the customer service number.
- Visit an ATM: Withdraw cash using your card and PIN, just like a debit card.
Remember that there are usually fees for ATM withdrawals from gift cards, so you may not be able to get the full amount off the gift card.
Purchase money orders
Some stores, including Walmart, allow you to purchase money orders using your open-loop gift cards. Once you have the money order, deposit it into your bank account or cash it at a check-cashing service. This process effectively converts your gift card balance into usable cash.
Add Open-Loop Cards to PayPal or Venmo
Many open-loop cards can be added to your PayPal or Venmo accounts. Add them like any other debit card to your payment methods and transfer the available balance from the gift card to your account.
Finally, transfer the funds from your PayPal or Venmo account to your linked bank account.
Note that this process may take a day or two for the funds to transfer and be available. Also, some gift cards may have restrictions preventing them from being added to these platforms, so review the terms and conditions.
Pay bills
Many open-loop gift cards can be used to pay everyday bills like internet, utilities, or medical bills. Using your gift cards in this way frees up money in your budget to cover your credit card debts.
Use the gift card information as you would a debit card when paying online or by phone, and make sure the card has enough balance to cover the bill’s total cost. If the balance is insufficient, contact the billing company to inquire about splitting the payment across multiple cards.
Options for Closed-Loop Gift Cards
A closed-loop gift card is a gift card that can only be used at a specific store or group of businesses. These are cards like Starbucks gift cards, Target gift cards, etc. While they aren’t as versatile as open-loop gift cards, there are still ways you can use them to help pay off your credit card debt.
Use gift cards for everyday expenses
If you’ve received gift cards for stores that sell essential items like groceries, toiletries, household goods, or even gas, consider using those cards for these everyday purchases. This effectively reduces the amount of cash you spend from your primary budget, giving you room to pay off credit card debt.
Sell your gift cards
If you have an unwanted gift card, you can try selling it on a platform like CardCash or Raise. While you won’t receive the full face value, these sites typically offer 70 to 80 cents on the dollar for your card. How much you get greatly depends on which retailer your card is for. But hey, some cash is always better than none.
Buy items and resell them
If all else fails, you can always purchase items from the store and try to resell them on platforms like eBay, OfferUp, or Facebook Marketplace. If you get the item on sale, you can resell it for a profit. Do some research and try to pick an item that is in demand and easy to resell. This method does require a lot more effort to get actual cash from the gift card, and you risk being stuck with an item you don’t want, but it’s worth a shot.
What should you do with gift cards that have a low balance?
If you have a gift card with a low or odd balance (ex: $5.23), there are still ways you can put that money to good use!
Split payments
Most online stores don’t allow for split payments, however, many brick and mortar stores are a different story. For store gift cards, the cashier usually handles this automatically. For example, if your coffee is $10.29 and you have a $5 gift card, you can swipe that and pay the remaining $5.29 with another card or cash. Some open-loop cards might not automatically let you make partial payments. In this case, ask the cashier to charge the full gift card amount and pay the rest with another method.
Transfer the balance
Combining cards simplifies your spending and makes tracking your gift card balance easier. Some prepaid cards issued by Mastercard and Visa allow for convenient card-to-card transfers within the same network. For instance, you can transfer funds between two MyVanilla Prepaid Visa Cards at no cost.
Buy a different gift card
You can use open-loop cards to reload gift cards you already have, even if it’s a small amount. For example, Amazon allows you to purchase gift cards on their site in any amount over $5 with zero fees. You can then use that card to buy essential items you already planned on buying, freeing up your budget to pay down more debt.
Other gift card tips
Don’t let gift cards get you into further debt
There’s no shame in using a gift card to treat yourself, but if you’re budget-conscious, make sure you don’t spend more than what’s on your card.
Use your gift cards ASAP
Capital One Shopping Research found that 71% of people have held onto a gift card for at least one year after receiving it. This move can be risky. You could lose them, forget about them, or their value can diminish. Open-loop cards (like Visa or Mastercard) are particularly susceptible to value erosion.
They often incur inactivity fees after a year of non-use, and inflation steadily diminishes their purchasing power, so it’s best to put those gift cards to good use!
