If you’ve been doing the credit card points game for a while, you’ve probably had this idea: “I could meet the spend requirement on my shiny new credit card by purchasing prepaid cash-equivalent gift cards!”
Bravo, that’s creative thinking! However, you’ll soon find out that those “good-as-cash” prepaid Visa and Mastercard gift cards (aka “open loop” gift cards) that line every supermarket and gas station checkout aisle can, in reality, be a PITA to liquidate.
Let’s say you just want to buy one for $500 to use for your everyday purchases for the next few weeks. Completely reasonable; prepare for a painful road ahead.
The big problem with prepaid gift cards: they’re difficult to spend online
Some open loop cards only work once registered with a name and address. Some card issuers will block your browser or IP if they think you’ve registered too many cards (where too many = ???lol figure it out). Many cards advertise that they can be used “in-store on online,” but aren’t accepted by most mainstream e-commerce retailers – even many “virtual” gift cards that are just an email with a number and expiration date, and thus cannot be used in-store.
The list of headaches goes on and on, and vary by brand, card network, and issuing bank. (Utility providers seem to be an exception to this rule – data points abound of utility providers eating all types of prepaid gift cards).
The most straightforward way to burn these is to either regift them (graduation season is coming!) or use them organically. Yes, there’s an opportunity cost to this (you could have earned 5x or 8x points on your power bill!) but sometimes you’ve got to set aside the urge to optimize, and just deal with the facts in front of you. There’s value locked inside a little piece of cardboard in your wallet, and if you don’t extract it, the bad guys win.
Free Tip: Costco purchases and Amazon Reload are known to reliably drain almost any prepaid gift card down to $0.
But can I get cash out of a prepaid Visa gift card or Mastercard gift card?
There are a few legitimate ways to convert a prepaid Visa or Mastercard gift card into cash value. Although some are easier, faster, or more efficient than others, they all come at some cost. None are foolproof.
Can I buy a money order with a prepaid gift card?
Congratulations, you’ve discovered “manufactured spending,” or generating credit card points by purchasing a cash-equivalent product that doesn’t fall under your card issuer’s cash advance rules. (Cash advances never count toward a minimum spend requirement). Flyertalk is filled with decades-old conversations about “street MS” – the business of buying prepaid gift cards with a credit card, then buying money orders with those gift cards. The TL;DR is that this gambit was much easier to do in the past, and that retailers and banks have largely (but inconsistently) put up barriers to doing this easily or quickly and at scale.
Is it possible? Yes. Is it easy? Not remotely. Most retailers will not allow you to repeatedly purchase $10K worth of gift cards with your credit card. Many stores that sell money orders are reluctant to sell cash equivalent money orders to anyone using a payment type that’s somewhat-less-than-cash-equivalent, and may have store policies or hard-coded POS limits on the kind of payments they’ll accept. And many banks will decide a customer with hundreds or thousands of MO deposits each month is probably involved in sketchy business and summarily close out your accounts.
Can I use a prepaid gift card to load a reloadable debit card?
This is basically the same as the money order gambit described above, minus the money orders. Some reloadable debit card account products allow users to transfer money out to a checking account, but good luck finding one. The well-known ones of old have all been restricted over the years. Moreover, the same list of failure modes above applies here. Sometimes it works, at some retailers in certain places, conditional upon whether the cashier is friendly toward you. All card programs and retailers can change their policies at any time without notice.
Can I send money to a friend on Paypal or Venmo using a prepaid gift card?
Once again, your mileage may vary when you go to load a gift card into your Paypal account. Some are not recognized, some will load but won’t be able to be spent easily. And sending money to a friend/spouse will nearly always comes with a 3% fee.
As for scale, both Venmo and Paypal are known to throttle the number of new debit/credit cards you can add to your account over a rolling period of X months.
Can I sell my prepaid gift card for cash?
Short answer: not easily.
Longer answer: This is a terrible idea. Ebay prohibits open-loop gift cards. You can theoretically list one on Facebook or Craigslist, but your post may get flagged as SUS AF. Any potential buyer who contacts you is either going to punch you and run away with your gift card, or submit a fraud claim against you in Venmo and get your money returned to them. Just don’t.
Can I buy a gift card with a gift card?
Now you’re thinking creatively. Retailers have different policies regarding this, but it should be possible to convert a limited-use, un-sellable prepaid gift card into a resellable 3rd-party gift card. Does this scale? Probably not. Is it profitable? Probably not.
Can I pay my mortgage with prepaid gift cards?
There was a service named Plastiq that had A Moment a few years ago. Users could load up several gebits of a certain flavor and, for a modest fee, Plastiq would mail off a check to their mortgage company, or daycare provider, or student loan servicer, or etc. Then the company went bankrupt. What emerged was essentially the same service, but with a general 2.9% fee on all card-based bill payment transactions and a lot of restrictions.
That said, there are degenerate points geeks out there using both popular and obscure billpay services to pay bills (and “pay” “bills”) with credit cards, debit cards, and prepaid gift cards in configurations where the return exceeds* the service fees.
*Often using “points math,” where the worth of a point is highly inflated.
Can I get cash from a prepaid gift card from an ATM?
No.
Can I make a purchase with a prepaid gift card, and later return it for cash?
You mean return fraud? Don’t do this. It doesn’t scale, it can get you banned from the store, and possibly into legal trouble. (Not a lawyer).
How can I spend my prepaid gift card online?
Some sportsbooks and social casinos will take certain cards.
Kasheesh is an app that splits transactions among your enrolled credit/debit cards, including many open loop gift cards.
Here’s an account of somebody who paid off his student loans using prepaid gift cards, at cost of 3% it should be noted. However he bought the cards on a 5X credit card, so overall net positive. (You gotta admire the tenacity of this optimizer!)