We investigated how the magneto-optical (MO) and magnetic properties of Gd–Fe-based giant magneto resistance (GMR) films with silver (Ag) spacers are affected using two different free-layer compositions, Gd21.7Fe78.3 and Gd27.5Fe72.5 (at. %). GMR films using Ag spacers exhibited a MO Kerr rotation (θK) that was about 10% larger than that with copper (Cu) spacers. Moreover, GMRs with Gd21.7Fe78.3 free layers exhibited larger θK and saturation magnetization (Ms) values than did those with Gd27.5Fe72.5 free layers. Current-perpendicular-to-plane (CPP) GMR devices using Gd21.7Fe78.3 and Gd27.5Fe72.5 free layers with Ag spacers were fabricated and employed in order to investigate the device’s spin transfer switching characteristics. The switching current density for CPP-GMR devices using Gd21.7Fe78.3 free layers was reduced by 26% compared to Gd27.5Fe72.5 free layers. The larger values of Ms exhibited by Gd21.7Fe78.3 layers may be attributed to a reduction of switching current. Ultimately, we found that CPP-GMR devices with Gd21.7Fe78.3 free layers and Ag spacers are good candidates for the light modulator applications, particularly advanced information display systems.