Aside from being a popular stocking stuffer, gift cards are a great way to earn bonus rewards with a credit card or meet a signup bonus’ spending threshold. The downside, of course, is that you typically either have to limit yourself to one store, or pay a purchase fee. But according to The Points Guy, you can skip the purchase fee with an American Express gift card with promo code HOLIDAYCC4 from now through January 31st, 2014.
How does it work?
If you go to American Express’ gift card website, you can select gift cards in denominations from $25 to $3,000 for a total of $5,000 per order. You can make the purchase with a credit card, and the promo code waives the $3.95+ per-card purchase fee. You do still have to pay shipping, though – up to $8.95 per order. You’ll just have to make sure that the rewards you earn outweigh the fee. You can do this by using a card that earns rewards on Amex gift card spending or using cash back websites.
Ebates currently gives 1% cash back on Amex gift cards, while Big Crumbs offers a promotional rate of 2% back, up from 1.75%. So that’s $50 or $100 earned on your $5,000 gift card purchase right there.
And now we come to credit cards – some will let you earn rewards on gift card purchases. For example, if you use the Starwood Preferred Guest from Amex, you earn 1 Starpoint per $1 spent. We value Starpoints at 2.3 cents each, so if you buy $5,000 in gift cards and pay $8.95 in shipping, you pay $5,008.95 and earn $115.21 in rewards. That’s pretty significant…but there are always caveats.
What’s the catch?
There’s a pretty big gotcha here. Some credit cards consider gift card purchases to be a cash advance, meaning you’ll be charged a 5% fee as well as (usually) a higher APR. Plus, you start accruing interest on cash advances the day they’re made, rather than after the grace period like normal purchases. Citibank and Chase consider Amex gift card purchases to be cash advances; other banks might as well. TPG says that the trick works with Amex credit cards, but proceed with immense caution to avoid being charged a hefty fee. (Readers, please chime in if this has worked for you and which credit card you use). Also, Amex doesn’t ship gift cards to Hawaii or Vermont.
That said, this is a good way to earn bonus rewards on what basically amounts to cash, since you can use Amex gift cards anywhere that American Express is accepted. Or you can, you know, give them as gift cards.