Gift Card Cash Back Laws

Gift Card Cash Back Laws

Gift cards are an essential tool for many people that are serious about travel.

For some, it is a way to lower the cost of travel by purchasing discounted gift cards for hotels, restaurants, or airlines.  As an example, I recently purchased a $200 Hyatt gift card to trigger an Amex Offer of $60 back at Hyatt properties.  I then used the Hyatt gift card for a stay; saving me nearly 30% on my stay.  I’ve also purchased a number of discounted gift cards from Amazon and eBay as well as brick and mortar stores.

For others, gift cards can be a tool for meeting minimum spend requirements for credit card sign up bonuses.  Whether you purchase gift cards at a discount to turn around and resell them or simply purchase gift cards to stockpile for future use, this is an easy way to meet minimum spend.

I recently purchased a $50 Chipotle card when Amazon was offering $8.63 off any purchase of $50 or more.  I noticed something interesting in the terms of the gift card:

Gift Card Cash Back Laws

Yes, that is right.  When your Chipotle gift card is worth less than $10, it can be exchanged for cash.  In fact, I did a little research, and some states require gift cards under a certain value to be redeemable for cash.  Here are states that have gift card cash back laws:

Gift Card Cash Back Laws

Most states that have laws require you to be able to “cash out” if the value is less than $5.  But California allows you to cash out if you have a value of under $10.  A few have it under $1.

New Jersey even has a $500 fine for retailers that refuse to cash out the gift card.  Some states, like Oregon, require that you have used the gift card at least once before cashing out.  Others state that the original value had to be above the cash out threshold (for example in Maine you couldn’t purchase a gift card for $3 and then go right around and cash it out immediately).

I found that a number of additional states have proposed legislation to require retailers to allow customers to cash out.  These states include New York, Illinois, Connecticut, and Texas; so check your state to see if new rules exist.

California does not have the requirement that a gift card must be used once before cashing it out.  It also does not have the requirement that the original value be above the minimum threshold.

If you are like me and have a box of nearly empty gift cards sitting around, this might be helpful.

Note: I originally had some info about how one could potentially leverage this for minimum spend requirements for a credit card.  I am not advocating that you go out and use this as a manufactured spend technique.  One it would be insanely time consuming and two, as commenters below point out, ethically questionable.

11 thoughts on “Gift Card Cash Back Laws”

  1. If you have the time to reach minimum spend doing this bullshit, which is undoubtedly unethical and borderline fraud, you could be doing something much better and more profitable with your time/life.

  2. Ok with messing with banks, but this would be on back of retailers. Figure out who eats the cost of the reward yiu are earning before doing this bs

  3. It wouldn’t be ethically “questionable” to buy $9.99 gift cards with the intent of cashing them out. It would indeed be fraud.

    No ifs, ands or buts.

    It would be under false pretenses and a misrepresentation at the time of purchase with the INTENT (important to many fraud statutes) to reap a material and/or financial gain for the defrauded party.

    By the way: Your disclaimer about not advocating a specific example of how to defraud a retail truly is ethically questionable. If you’re not advocating it, why mention it? Your last sentence would have sufficiently explained the utility of these rules.

  4. It can’t be unethical to require a retailer to obey the law. If they don’t want to cash out gift cards as required by law, the retailer has the option to not issue gift cards. If the retailer chooses to issue gift cards they have voluntarily committed to obey the controlling statutes and the consumer has every right to cash out the gift cards at will, as provided by law. The law always, always trumps ethics.

    But laws aside, while a consumer may buy a gift card with the intent to cash it out, the retailer is selling that gift card with the intent that said consumer will lose it, forget about it, or otherwise fail to redeem it for fair value and the retailer will reap illicit profits. Who can lay claim to the ethical high road?

    I say then follow the laws as written and leave ethics to philosophers.


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