thread Re: Loan declined because of a few gift cards? in Banking With Square

Loan declined because of a few gift cards?

CMBSA — Fri, 27 Feb 2026 04:34:13 GMT

I paid off my loan and got a new loan application declined because I unknowingly accepted a few gift cards during the holiday season, which none got chargebacks.

I’ve had multiple loans before, all paid off way before they were due. I just find it frustrating that I got declined because of a very rare honest mistake during holiday season. I would have never thought square wouldn’t allow gift cards especially during the holidays.

I wonder if anyone has had a similar issue before, and when would I be eligible for a loan again, because all my factors are in green except “account activity” because I had a declined loan only because of the gift cards thing.

Re: Loan declined because of a few gift cards?

Minion — Mon, 02 Mar 2026 00:45:18 GMT

HI @CMBSA

Welcome to the square community. Sorry but I'm not quite following. You accepted gift cards that customers purchased from your business as a source of payment and a loan was denied because of that, is that correct?

Re: Loan declined because of a few gift cards?

CMBSA — Mon, 02 Mar 2026 11:46:24 GMT

No. They weren’t purchased from my business. They were Mastercard and Visa giftcards.

Re: Loan declined because of a few gift cards?

Minion — Mon, 02 Mar 2026 11:57:42 GMT

@CMBSA wrote:
No. They weren’t purchased from my business. They were Mastercard and Visa giftcards.

That doesn't make sense. You should be able to accept MC and Visa gift cards using Square as long as it is not you yourself using them to make a purchase through your own company.

Have you tried to call into the banking department for support on this? In all honesty there may not be anything that they can do manually at this time since these algorithm based loans, (many companies are not able to overturn decisions ) but it would raise awareness to a potential issue.

Let us know what you find out.

Re: Loan declined because of a few gift cards?

TheRealChipA — Mon, 02 Mar 2026 14:05:36 GMT

Unless I'm missing something, I think the fact that they were gift credit cards might be a distraction from the real issue here. The real issue is that there were chargebacks, and chargebacks no matter the source are a red flag for the loan algorithm. That being said, I agree with @Minion that since you can't verify "owner" identity for gift credit cards, they should be handled differently when chargebacks, occur.

I'm curious, @CMBSA.. You said it was an "honest mistake." Did the bank that issued the gift cards say something about your procedure in accepting them being wrong? Why did the banks rule against you? That fact, which you didn't tell us, could be all the difference.

Re: Loan declined because of a few gift cards?

CMBSA — Mon, 02 Mar 2026 14:14:58 GMT

There were no chargebacks at all. For context, it was a Vanilla cash gift card, or similar. All transactions went through smoothly with no issues. The issue is getting declined for a loan because I accepted gift cards, even though they went through with no chargebacks or issues.

The “honest mistake” was that Square declined the loan application because I accepted those cards even though there were absolutely no issues with those transactions, because apparently they are not acceptable transactions by Square, which is totally new to me and had no idea that was a thing.

I found this pretty frustrating not only getting declined, but having to turn away potential business if a potential client wants to do use a gift card.

Re: Loan declined because of a few gift cards?

TheRealChipA — Mon, 02 Mar 2026 14:56:02 GMT

@CMBSA Very odd. I just reviewed this document on loan eligibility. Nowhere does it mention that accepting card network gift cards is a factor. Do you have a screen shot of the message from Square where they pointed to this as the factor? It definitely doesn't make sense from my research so far, and I agree with @Minion.. If Square accepts a card, it should not count against you, unless you or a family member purchased that card.

Re: Loan declined because of a few gift cards?

CMBSA — Mon, 02 Mar 2026 21:57:52 GMT

“Square point of sale is not designed for the excessive processing of prepaid cards.

Please refer to Section 3 of the General Terms and Section 3 of the Payment Terms: https://squareup.com/legal/ua

Keep in mind that Square sellers are periodically reviewed for loan offer eligibility. We’ll be sure to notify you by email and in your Square dashboard if your business becomes eligible for a loan offer at a later time. If you have additional questions regarding eligibility for a Square Loan, feel free to view our FAQ.

Please let me know if you have any additional questions.”

this is their explanation. Not sure what they consider “excessive”. I rarely see gift cards. Only around the holidays is when I see them the most

Re: Loan declined because of a few gift cards?

TheRealChipA — Mon, 02 Mar 2026 22:08:30 GMT

Wow. I will admit to this being a first in my decade+ relationship with Square. So, I'll agree that a couple of prepaid cards shouldn't be considered excessive. At this point, I'd tag a few Square moderators here. But after the bloodbath at Square a few days ago, I'm not sure which, if any, of them are left. Maybe @Abby_M?

Re: Loan declined because of a few gift cards?

Minion — Mon, 02 Mar 2026 22:20:12 GMT

@CMBSA wrote:
“Square point of sale is not designed for the excessive processing of prepaid cards.

Please refer to Section 3 of the General Terms and Section 3 of the Payment Terms: https://squareup.com/legal/ua
Keep in mind that Square sellers are periodically reviewed for loan offer eligibility. We’ll be sure to notify you by email and in your Square dashboard if your business becomes eligible for a loan offer at a later time. If you have additional questions regarding eligibility for a Square Loan, feel free to view our FAQ.

Please let me know if you have any additional questions.”

this is their explanation. Not sure what they consider “excessive”. I rarely see gift cards. Only around the holidays is when I see them the most

I agree here with @TheRealChipA , and out of all the loan denials that I have come across here in the community this is definitely a first that I have seen a denial for such. I just read section 3 of the general terms, and although I'm sure I missed it I saw no reference to gift cards. In the payment terms section, while it did mention gift cards, I read that and interpreted that as you are not able to use their (Square) system for selling of those types of things listed in that section of the payment terms.

Hopefully Abby is still around and can help you with this!

Re: Loan declined because of a few gift cards?

TheRealChipA — Mon, 02 Mar 2026 22:42:24 GMT

And it just gets weirder. From this Payment Terms document, here is a quote that implies that prepaid/gift cards are allowed by Square for payment. No limitations. No restrictions.

"Among other payment methods, our Payment Services allow you to accept payments from any US-issued and most non-US issued credit, debit, prepaid, or gift cards (“Cards”) bearing the trademarks of American Express Travel Related Services Company, Inc. (“American Express”), DFS Services, LLC (“Discover”), MasterCard International Inc. (“MasterCard”) and Visa Inc. (“Visa”) (collectively, the “Networks”)."

Also, I did a browser search of this document. The words "prepaid" and "gift" aren't in it, period. So if this is indeed a true restriction -- which I highly doubt -- then Square needs to get on the ball and say so in its TOS and other governing documents.

Re: Loan declined because of a few gift cards?

CMBSA — Mon, 02 Mar 2026 22:46:12 GMT

I thought it was very odd. And I’m quite disappointed, not only Because of the loan decline for this reason, but also now my account is flagged and now I’m worried about accepting any gift or prepaid cards .

Re: Loan declined because of a few gift cards?

Minion — Mon, 02 Mar 2026 22:52:52 GMT

@TheRealChipA wrote:
And it just gets weirder. From this Payment Terms document, here is a quote that implies that prepaid/gift cards are allowed by Square for payment. No limitations. No restrictions.

"Among other payment methods, our Payment Services allow you to accept payments from any US-issued and most non-US issued credit, debit, prepaid, or gift cards (“Cards”) bearing the trademarks of American Express Travel Related Services Company, Inc. (“American Express”), DFS Services, LLC (“Discover”), MasterCard International Inc. (“MasterCard”) and Visa Inc. (“Visa”) (collectively, the “Networks”)."

Also, I did a browser search of this document. The words "prepaid" and "gift" aren't in it, period. So if this is indeed a true restriction -- which I highly doubt -- then Square needs to get on the ball and say so in its TOS and other governing documents.

Exactly. Definitely some unclear and contradicting verbiage being used throughout.

I even asked Jenny the AI chat bot while I was on that page and the AI kept stating that they were accepted but always used the word "generally accepted" .

Re: Loan declined because of a few gift cards?

perkits — Tue, 03 Mar 2026 02:46:34 GMT

This seems like a possible glitch in the bank loan algorithm. I agree with @TheRealChipA and @Minion I would tag Abby, but at this point who's still available.

Re: Loan declined because of a few gift cards?

JUYBoutique20 — Tue, 03 Mar 2026 03:00:11 GMT

I have never heard of this and I've taken them before. You said now your account is flagged. Is that a separate issue or the same as the loan being declined?

Re: Loan declined because of a few gift cards?

CMBSA — Tue, 03 Mar 2026 11:37:08 GMT

I’m not quite sure to be honest. I know I’m not eligible for a square loan at least currently, but they made me sign an agreement that I was not going to take prepaid cards anymore.

Re: Loan declined because of a few gift cards?

VanKalkerFarms — Tue, 03 Mar 2026 15:00:52 GMT

I'm not sure what you mean that you were declined because of a few gift cards. Where they stolen cards cause you say none got chargebacks, so that seems good. I haven't heard of gift cards being an issue, and we take them all the time and still get loan offers (but I haven't ever taken one, so I can't comment past that).

Re: Loan declined because of a few gift cards?

JUYBoutique20 — Tue, 03 Mar 2026 19:48:56 GMT

Oh wow....this is definitely strange. @Abby_M are you able to check on this.

Re: Loan declined because of a few gift cards?

Doran — Tue, 03 Mar 2026 20:20:51 GMT

I also take/sell a lot of gift cards during the holidays and receive loans. A few years ago, after applying for the loan, they did call to confirm what the large amounts were. It was unusual for my account. I explained they were gift card sales from the holidays and all was fine. They issued the loan.

The loans reset daily from a set period. I don't remember the exact details, but keep an eye out for your account and if you are eligible, then the offer will come through your dashboard.

Re: Loan declined because of a few gift cards?

Doran — Tue, 03 Mar 2026 20:25:11 GMT

It seems like they are qualifying them differently. Like a cash sale, almost, and we know cash sales don't factor into the Square loan qualifications or algorithm. That is new to me. I thought those prepaid cards were all the same as a regular card.