/u/nothing_throwaway 's post is very useful.
Untested I assume you can buy gift cards with gift cards, however the site may disallow it. If I find out otherwise I'll redact this post.
Since there's a shipping fee that puts the total fees over 1%, you essentially just have to pay shipping. However since you can't use your 1% points the first purchase, you end up actually paying the fees in full for the first card you buy.
However, you can actually "avoid" that first fee. This can be done by buying a Visa eGift Card (no shipping), then using the eGift card to buy your physical gift card.
In this table it shows buying a $500 physical card with $4.95 activation fee and $1.99 shipping. Since the first points can't be applied, you end up paying in full the first $6.94 fee.
| Order | Type | Total Fees | Average Fee % |
|---|---|---|---|
| 1 | Physical | $6.94 | 1.39% |
| 2 | Physical | $1.87 | 0.88% |
| 3 | Physical | $1.92 | 0.72% |
| 4 | Physical | $1.92 | 0.63% |
By the third card it reaches an equilibrium of paying $1.92 in fees (essentially just shipping) so the average % fee slowly approaches around 0.4% ($1.92/$500).
This table shows what would happen if you bought an eGift first, then used it to buy a physical card.
| Order | Type | Total Fees | Average Fee % |
|---|---|---|---|
| 1 | eGift | $4.95 | 0.99% |
| 2 | Physical | $1.89 | 0.68% |
| 3 | Physical | $1.92 | 0.58% |
| 4 | Physical | $1.92 | 0.53% |
You could even buy an eGift with an eGift. The more cycles you do the quicker you approach that 0.4%.
| Order | Type | Total Fees | Average Fee % |
|---|---|---|---|
| 1 | eGift | $4.95 | 0.99% |
| 2 | eGift | ($.05) | 0.49% |
| 3 | eGift | ($.05) | 0.32% |
| 4 | Physical | $1.94 | 0.34% |
Not shown in the table above is the % then (very) slowly approaches 0.38%. So thee cycles is all it really takes.