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Advice

33% of Americans plan on giving more digital gift cards this year—here's how to get a discount with a credit card

Gift cards are often excluded from coupon codes, but you can use credit cards to your advantage and save on gift card purchases. Here's how.

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Whether it's a crisp $50 bill inside of a greeting card, or a gift card to your favorite store, getting money for the holidays is great because you can spend it however you want. 

And if you're far away from loved ones, you can always send gift cards digitally, making them one of the most convenient ways to deliver holiday cheer.

This year, the trend is becoming more popular: One in three consumers (33%) expect to give more digital gift cards during the 2020 holiday season compared to past years, according to the holiday edition of the Visa Back to Business Study.

When you purchase items online, like clothing, electronics and other gifts, there's usually a place to add coupon codes at checkout to get a discount. But more often than not, gift cards don’t qualify for these promo codes.

However, there are other ways to save by using certain credit cards when you buy gift cards online or in the store.

Below, CNBC Select reviews how you can use credit cards to your advantage and save on gift card purchases.

How to get gift cards at a discount

Getting a discount on credit cards starts with a little research. Plenty of third-party online sites offer low-priced gift cards, but they are not always reputable.

To avoid being scammed and receiving a fake gift card with no balance, double-check the site and seller prior to purchasing a discount gift card. Better yet, go directly to the source, whether it’s the actual retailer (like Apple) or a major company like Target that sells Apple gift cards.

With safety top-of-mind, here are a few ways you can use credit cards to get a discount on your next gift card purchase.

Use a credit card with real-time rewards

Some credit cards, like the Target RedCard™, give shoppers a discount just for using their credit card to pay for their items — including gift cards.

RedCard holders receive a 5% discount at checkout on most purchases in-store and at Target.com. That means you can save 5% on a wide variety of specialty gift cards from food like Starbucks to electronics like Apple by buying them from Target with your RedCard.

There are some gift card exclusions, like Target gift cards and prepaid cards, but overall you can instantly save 5% on over 300 types of gift cards.

If you purchase an eligible $50 gift card, you’ll instantly save 5% with your RedCard, which works out to $2.50 in savings. And the more gift cards you buy, the more your savings add up.

Unlike traditional rewards cards that may take a billing cycle to receive your rewards, cards with instant rewards programs, like the RedCard, give you a discount on your purchase at checkout.

Pay with a rewards card

When you don't have a credit card with instant discounts, consider using a rewards card for your gift card purchases. The best rewards credit card to use for purchasing gift cards is one that earns an above-average cash-back rate, around 2% or more.

The Amazon Prime Rewards Visa Signature Card earns 5% cash back on Amazon.com. You could purchase a $100 Amazon.com gift card with your Amazon Prime card, earn $5 cash back, then redeem it for a statement credit to offset your bill.

Redeem rewards for gift cards

If you don’t have a cash-back credit card, another option is to redeem the points or miles you’ve accrued for a gift card. When you redeem your points/miles for a gift card, you typically receive a 1:1 value, which means one point/mile is worth a penny. This is a standard redemption rate and can help you get gift cards without charging anything new to your card.

You should also look out for gift card redemption promotions. Chase is the main issuer that offers Ultimate Rewards® cardholders 10% off a variety of gift cards, currently including Grubhub and Subway. Some eligible cards include the Chase Freedom Flex℠, Chase Freedom Unlimited® and Chase Sapphire Preferred® Card. Through these promotions, a $25 gift card that would typically cost 2,500 points, would only cost 2,250 points.

Look for Amazon promotions 

Another way to get a discount on your gift card is to look out for credit card limited-time promotions on Amazon. Many card issuers often run promos that allow you to receive a discount on your Amazon purchase (including gift cards) when you pay for part of your order with points, miles or cash back.

Currently, Capital One is offering a promotion where eligible cardholders who have never used their miles or cash back rewards to shop at Amazon.com can get $20 off their next Amazon.com order of $80 or more. This promotion runs through December 31, 2020.

To activate the discount, you’ll need to enroll in the Shop with Points program and add your eligible Quicksilver, Savor or Venture card. Once enrolled, activate the $20 savings offer by visiting amazon.com/CapitalOneOffer. Next, add a minimum of $80 worth of eligible products sold and shipped by Amazon to your cart and then checkout using at least one point/one penny of cash back to qualify for the discount. There are some Shop with Points exclusions, but Amazon doesn’t list gift cards as one.

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Information about the Target RedCard™, Amazon Prime Rewards Visa Signature Card and Capital One cards has been collected independently by CNBC and has not been reviewed or provided by the issuers of the cards prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.