Complete Gift Card Guide

What Are Gift Cards?

Gift cards are prepaid stored-value money cards that can be used as an alternative to cash for purchases within a specific store or group of stores. They come in two main formats: physical plastic cards and digital electronic codes.

When you purchase a gift card, you load it with a predetermined amount of money. The recipient can then use this stored value to make purchases until the balance is depleted. Modern gift cards have evolved significantly from simple paper gift certificates to sophisticated payment instruments with advanced security features.

How Do They Work Technically?

Each gift card contains a unique identification number and, in most cases, a Personal Identification Number (PIN). These numbers are linked to a database that tracks the card's balance in real-time.

When you make a purchase using a gift card, the merchant's system contacts the card issuer's database to verify the card's validity and available balance. If sufficient funds exist, the purchase amount is deducted from the balance, and the transaction is approved. This process typically takes only seconds.

For physical cards, information may also be stored on a magnetic stripe or chip, similar to debit cards. Digital gift cards use secure codes transmitted electronically, often through email or mobile apps.

The History and Evolution

Gift cards emerged in the 1990s as retailers sought to replace traditional paper gift certificates. The first closed-loop gift cards (usable only at specific retailers) appeared in 1994. These early cards were simple and prone to balance tracking issues.

The 2000s brought major innovations, including online balance checking, the ability to reload cards, and enhanced security features. The introduction of digital gift cards in the late 2000s revolutionized the industry, enabling instant delivery and eliminating shipping concerns.

Today, gift cards represent a multi-billion dollar industry. They have become sophisticated financial instruments with features like partial redemption, balance consolidation, and integration with mobile payment systems.

Closed-Loop Gift Cards

Closed-loop cards are issued by specific retailers and can only be used at those retailers' locations or websites. Examples include cards from individual department stores, restaurants, or online marketplaces.

Advantages:

• Usually no purchase fees or activation costs
• May offer promotional bonuses during holiday seasons
• Often include special perks like free shipping or exclusive access
• Simpler terms and conditions

Limitations:

• Limited to specific merchant locations
• Less flexibility for recipients
• Value may be lost if the retailer closes or changes policies

Open-Loop Gift Cards

Open-loop cards carry the logo of payment networks and can be used anywhere those networks are accepted. These function similarly to prepaid debit cards but are marketed as gifts.

Advantages:

• Maximum flexibility for recipients
• Can be used at millions of locations worldwide
• Suitable for online and in-person purchases
• Often work at ATMs for cash withdrawal (with fees)

Limitations:

• Usually include purchase fees ranging from three to six dollars
• May have monthly maintenance fees after a certain period
• More complex terms and conditions
• Potential for declined transactions at certain merchants

Digital vs. Physical Cards

Digital Gift Cards: These are delivered electronically via email, text message, or mobile app. They contain a code that can be entered during online checkout or displayed at physical stores for scanning.

Digital cards offer immediate delivery, making them perfect for last-minute gifts. They eliminate the risk of physical loss or damage and are environmentally friendly. Many digital cards can be stored in mobile wallets for convenient access.

Physical Gift Cards: Traditional plastic cards available at retail locations. They may feature attractive designs and can be presented as tangible gifts.

Physical cards provide a more traditional gifting experience and can be displayed or kept as memorabilia. However, they require shipping time if ordered online and can be lost or damaged.

Reloadable Gift Cards

Some gift cards allow you to add additional funds after the initial value is spent. These reloadable cards can serve as ongoing payment tools rather than one-time gifts.

Reloadable cards are useful for recurring gifts (like monthly allowances), budgeting tools, or as an alternative to bank accounts for individuals who prefer not to use traditional banking services. Parents often use them to teach children financial responsibility.

These cards typically require registration with the issuer, which provides additional security benefits such as replacement if lost or stolen.

Promotional and Reward Cards

Some gift cards are issued as promotional incentives, employee rewards, or rebate fulfillments rather than being purchased directly. These cards often have different terms than standard retail gift cards.

Promotional cards may have expiration dates, limited usability, or restrictions on certain types of purchases. Always read the terms carefully when receiving promotional gift cards, as they may not have the same protections as purchased cards.

Direct from Retailers

The most straightforward and secure method is purchasing directly from the retailer who will honor the card. This can be done at physical store locations or through the retailer's official website.

Buying directly ensures card authenticity and provides immediate access to customer support if issues arise. Many retailers offer digital delivery options with customizable greeting messages and designs.

Official retailer websites often run special promotions, such as bonus cards with large purchases or discounts during holiday periods. These deals can provide extra value when purchasing gift cards.

Authorized Third-Party Retailers

Major retailers, pharmacies, and grocery stores carry gift cards from various brands. These locations offer convenience and the ability to purchase multiple cards from different brands in one trip.

When buying from third-party locations, inspect cards carefully before purchase. Check that packaging is intact, activation stickers are not tampered with, and card information is not exposed. Damaged packaging may indicate tampering attempts.

Some third-party retailers offer loyalty points or cash back on gift card purchases, providing additional value to the buyer.

Online Marketplaces

Legitimate online marketplaces operated by established companies sell gift cards from various brands. These platforms often provide convenience and occasionally offer discounted cards.

When using online marketplaces, verify the platform's reputation through reviews and ratings. Be cautious of deals that seem too good to be true, as they may involve fraudulent or stolen cards.

Reputable platforms provide buyer protection and guarantee card authenticity. They should clearly display terms regarding delivery timeframes and policies for non-working cards.

What to Avoid

Never purchase gift cards from:

• Auction sites or individual sellers unless the platform provides strong buyer protection
• Social media marketplaces where seller verification is limited
• Websites with poor security indicators or unprofessional design
• Email offers from unknown senders claiming discounted cards
• Any source requesting payment via wire transfer or cryptocurrency

Exercise extreme caution with discounted gift cards from secondary markets. While legitimate discount gift card exchanges exist, this market also attracts fraudsters selling stolen or invalid cards.

Verification Before Purchase

Before completing a gift card purchase, take these verification steps:

• Examine physical cards for signs of tampering, including scratched-off PINs or damaged packaging
• Verify the website URL matches the official retailer domain
• Check that the payment page uses secure encryption (look for HTTPS and a padlock icon)
• Review the seller's return and refund policies
• Save all purchase receipts and confirmation emails

Activation Process

Most gift cards activate automatically at the time of purchase when the cashier scans them and processes payment. You should receive a receipt confirming the activation and initial balance.

For cards received as gifts, verify activation before attempting to use them. Some retailers provide online or phone activation check services. If a card does not work despite appearing activated, contact the issuer with your purchase receipt.

Digital gift cards typically activate within minutes to hours of purchase. You will receive an email with the card code and instructions. Keep this email secure and do not share it publicly.

Using Cards for Online Purchases

When shopping online, locate the payment options during checkout. Look for fields labeled "Gift Card," "Promo Code," "Apply Gift Card," or similar variations.

Step-by-step process:

1. Add items to your shopping cart as usual
2. Proceed to checkout
3. Find the gift card payment section (usually before or after entering shipping information)
4. Enter your gift card number (typically 16 digits)
5. Enter the PIN or security code if required (usually found on the back of physical cards)
6. Click "Apply" or "Add Gift Card"
7. Verify the balance is applied to your order total
8. If the balance is insufficient, add another payment method for the remaining amount

Some websites allow combining multiple gift cards in one transaction. Others may limit you to one card per order. Check the retailer's policies if you need to use multiple cards.

Using Cards at Physical Stores

At physical retail locations, present your gift card during checkout. For physical cards, hand them to the cashier or insert/swipe them in the payment terminal when prompted.

For digital gift cards on your phone, show the barcode or card number to the cashier for scanning or manual entry. Ensure your phone screen brightness is sufficient for scanners to read barcodes.

Inform the cashier if you want to split payment between a gift card and another payment method. Most point-of-sale systems can process split payments easily.

Checking Your Balance

Regularly checking your gift card balance helps avoid declined transactions and ensures you know how much remains available.

Balance checking methods:

• Online: Visit the issuer's website and look for "Check Balance" or similar links, usually in the footer. Enter your card number and PIN when prompted.
• Phone: Call the customer service number on the back of the card. Automated systems typically provide balance information without waiting for a representative.
• Mobile App: Many major retailers offer apps where you can add your gift card and view the balance.
• Receipt: Your transaction receipt often shows the remaining balance after a purchase.
• In-Store: Ask a cashier to check the balance at a register.

Dealing with Partial Balances

When your gift card has a small remaining balance, you have several options:

Use it for small purchases: Buy inexpensive items that fit within the remaining balance.

Combine with other payment: Many retailers allow you to use a gift card for partial payment and cover the remainder with a credit card, debit card, or cash.

Reload if possible: If the card is reloadable, add more funds to bring it back to a useful amount.

Cash out small amounts: Some states require retailers to cash out gift cards with balances below a certain threshold (typically five to ten dollars). Check your state's laws and the retailer's policy.

Donate: Some charitable organizations accept gift cards with small balances.

Transferring or Selling Gift Cards

If you receive a gift card you cannot use, several legitimate options exist for transferring or converting the value:

Gift to someone else: Simply pass the unused card to someone who can use it. Treat the card like cash and keep it secure during transfer.

Trade with friends or family: Exchange with someone who has a card you prefer.

Sell through reputable exchanges: Legitimate gift card exchange websites buy unwanted cards, typically offering 60-90 percent of the face value. Research the platform's reputation before using these services.

Be aware that some terms and conditions prohibit resale of gift cards. While enforcement is rare for individuals making occasional sales, understand that you may lose protections if issues arise with transferred cards.

Common Gift Card Scams

Understanding prevalent scams is the first step in protecting yourself:

Payment Scams: Scammers impersonate government officials, tech support, utility companies, or even family members in distress, demanding payment via gift cards. Remember: legitimate organizations never request payment through gift cards.

Phishing Emails: Fraudulent emails claiming you have won a prize or need to verify account information by providing gift card details. These emails often contain links to fake websites designed to steal card information.

Card Draining: Thieves record gift card numbers and PINs from store displays, then repeatedly check balances online until the card is activated and immediately drain the funds.

Fake Retailers: Websites impersonating legitimate retailers to collect payment information without delivering valid gift cards.

Social Media Scams: Posts offering discounted gift cards or fake giveaways designed to collect personal information or payment.

Protection Strategies

Purchase Protection:

• Buy only from authorized retailers or official websites
• Inspect physical cards for tampering before purchase
• Keep purchase receipts in a safe place
• Photograph or write down card numbers immediately after purchase
• Register cards with issuers when possible for additional protection

Usage Protection:

• Never share card information through email, text, or social media
• Use secure internet connections when entering card details online
• Avoid using public computers or unsecured WiFi for gift card transactions
• Check balances regularly to detect unauthorized use quickly
• Use cards promptly rather than storing them for extended periods

Personal Information Protection:

• Be skeptical of unsolicited contact requesting gift card payment
• Verify the identity of anyone asking for gift cards through independent channels
• Never provide Social Security numbers, bank information, or passwords in exchange for gift cards
• Research companies before purchasing from unfamiliar websites

What to Do If You Are Scammed

If you realize you have been victimized by a gift card scam, take immediate action:

Contact the gift card issuer: Call the customer service number on the card or website immediately. Report the fraud and provide all relevant details. Some issuers may be able to freeze the card or track where funds were spent.

Report to authorities:

• File a report with your local police department
• Report to the Federal Trade Commission at ReportFraud.ftc.gov
• Contact your state Attorney General's office
• If the scam involved impersonation of a government agency, report to that agency

Document everything: Save all emails, text messages, receipts, and notes about phone conversations. This documentation may be necessary for investigations or potential recovery efforts.

Warn others: Share your experience (without revealing personal details) to help prevent others from falling victim to the same scam.

Unfortunately, recovery of funds in gift card scams is rare once the cards have been used. However, reporting remains important for law enforcement efforts and may help in some cases.

Legitimate Gift Card Requests

Legitimate scenarios where gift cards may be appropriately requested include:

• Friends or family asking for specific gift cards as presents (verify through trusted communication channels)
• Employers using gift cards as authorized rewards or incentives (distributed through official company channels)
• Legitimate raffles or contests with clearly stated rules and verifiable sponsors
• Charitable organizations specifically requesting retail gift card donations (verify the organization's legitimacy)

Even in these scenarios, verify the request through independent means rather than relying solely on the initial contact.

Mistake 1: Not Keeping Purchase Records

Many people discard receipts immediately after purchasing gift cards. This creates problems if the card fails to activate properly or if you need to prove ownership.

Solution: Keep all purchase receipts until the card is fully used. For digital purchases, save confirmation emails in a dedicated folder. Consider photographing physical receipts for backup.

Mistake 2: Assuming All Gift Cards Never Expire

While federal law prohibits expiration dates within five years of purchase for most gift cards, exceptions exist. Promotional cards, rewards cards, and certain prepaid products may have different rules.

Solution: Read the terms and conditions carefully. Note any expiration dates or fees. Use cards well before expiration to avoid complications.

Mistake 3: Failing to Check Activation

Some gift card recipients attempt to use cards without verifying activation, leading to embarrassment at checkout or declined online transactions.

Solution: Check the balance online or by phone before attempting to use a gift card. This confirms activation and shows how much is available.

Mistake 4: Losing or Discarding Card Information Too Soon

After using most of a gift card's balance, people often throw away the card or delete digital codes, forgetting small remaining amounts.

Solution: Keep gift card information until the balance reaches zero. Set reminders to use cards with small remaining balances.

Mistake 5: Using Cards at Wrong Merchants

Closed-loop gift cards only work at specific retailers, but confusion can occur with similar brand names or affiliated companies.

Solution: Carefully read where the gift card can be used. When in doubt, check the issuer's website for a list of participating locations.

Mistake 6: Not Registering Cards When Offered

Many gift card issuers offer registration services that provide replacement if cards are lost or stolen. Many people skip this step.

Solution: Register gift cards whenever possible, especially higher-value cards. This takes only a few minutes and provides significant protection.

Mistake 7: Buying from Risky Sources

The temptation of discounted gift cards from auction sites or unknown sellers leads some buyers to risk fraud.

Solution: Purchase only from authorized retailers and official websites. The savings from discounted cards rarely justify the risk of receiving invalid or stolen cards.

Mistake 8: Sharing Card Information Publicly

People sometimes post photos of gift cards on social media without realizing visible numbers can be stolen and used immediately.

Solution: Never post photos showing card numbers, PINs, or barcodes. If sharing a gift card image, obscure all sensitive information.

Mistake 9: Ignoring Balance Depletion

Some victims of card draining scams do not check balances before attempting to use cards, only discovering the theft at checkout.

Solution: Check balances before shopping, especially if cards have been sitting unused for a while. Early detection of unauthorized use improves chances of resolution.

Mistake 10: Not Understanding Return Policies

Gift card purchases for items later returned often result in confusion about refund methods. Many people expect cash refunds but receive gift card credit instead.

Solution: Understand the retailer's return policy for purchases made with gift cards before buying. Policies vary significantly between retailers.

Strategic Purchasing

Save money when buying gift cards by taking advantage of promotions:

• Holiday bonuses: Many retailers offer bonus cards during major holidays (buy $50, get $10 free)
• Loyalty program points: Some credit cards or store loyalty programs provide rewards on gift card purchases
• Bulk discounts: Businesses purchasing large quantities may receive volume discounts
• Seasonal sales: Some retailers discount their own gift cards during slow periods

Strategic Usage

Get the most value from gift cards you receive:

• Wait for sales to stretch the card's purchasing power
• Combine with coupons and other discounts when allowed
• Use during promotional periods with special perks
• Purchase discounted items to maximize what you receive
• Consider buying gift cards for yourself before large planned purchases if bonuses are available

Avoiding Value Loss

Prevent losing gift card value through:

• Using cards before any maintenance fees could apply
• Keeping cards secure to prevent theft or loss
• Maintaining records to facilitate replacement if needed
• Using small remaining balances rather than letting them sit unused
• Checking balances regularly to detect unauthorized use early

Gift Cards for Minors

Gift cards can serve as educational tools for teaching children financial responsibility. However, supervision is important:

For younger children, parents should maintain control of card information and approve all purchases. This prevents unauthorized spending and helps guide decision-making.

Older children can learn budgeting by managing their own cards, but parents should establish clear guidelines and periodically review usage.

Consider starting with lower-value cards until children demonstrate responsible usage patterns.

Gift Cards in Business Contexts

Businesses use gift cards for various purposes including employee rewards, customer incentives, and rebate fulfillment. When handling gift cards in business settings:

Maintain detailed records for accounting and tax purposes. Some gift card expenditures may be tax-deductible business expenses.

Distribute cards through secure channels and obtain recipient acknowledgment when appropriate.

Understand that gift cards to employees may constitute taxable income in certain situations.

International Gift Cards

Gift cards purchased in one country may not work in another, even for international retailers. Regional restrictions typically apply to prevent currency arbitrage and manage regional pricing strategies.

If sending gift cards internationally, verify whether the specific card will work in the recipient's country. Some retailers offer separate gift card products for different regions.

Currency conversion issues can affect card value. Understand how exchange rates apply if using cards across borders.

Accessibility Considerations

Some individuals with disabilities may face challenges using gift cards:

Vision impairments can make reading card numbers or PINs difficult. Consider registering cards with customer service representatives who can provide telephone support.

Mobile app access may be easier for some users than physical cards.

Retailers with accessibility commitments often provide alternative formats or assistance upon request.