How Do Gift Cards Work? From Activation to Spending
Unlock the full potential of gift cards. Learn how they work, from initial activation to seamless spending and understanding key terms.
Gift cards are prepaid tools loaded with a specific monetary value. They offer a convenient method for gifting or personal budgeting, allowing recipients to acquire goods or services up to the card’s loaded amount.
How Gift Cards Store and Access Value
Gift cards operate by associating a unique identifier, like a card number or barcode, with a stored value in a centralized database. The monetary value is not physically on the card, but linked to the unique code. When a transaction occurs, the card reader scans this identifier, communicates with the system, verifies the balance, and deducts the purchase amount.
There are two types of gift card systems: closed-loop and open-loop. Closed-loop cards are issued by specific retailers and can only be used within that store or network, such as a coffee shop or clothing retailer. Open-loop gift cards, branded by major payment networks like Visa or Mastercard, can be used wherever that network’s cards are accepted, offering broader usability similar to a debit card.
Obtaining and Preparing Gift Cards for Use
Gift cards are purchased in physical stores or online. In-store, the cashier activates the card at the point of sale by scanning it and loading the desired amount, making it ready for immediate use.
Cards purchased online or received as gifts may require additional activation steps. This often involves visiting the issuer’s website, calling a toll-free number, or using a mobile application. Activation is a security measure that validates the card, preventing unauthorized use. During this process, you may need to provide the card number, a security code, and possibly a PIN to link the card to its value.
Spending Your Gift Card
Using a gift card for purchases is simple, whether in a physical store or online. For in-store transactions, present the gift card at checkout; it can be swiped, inserted, or tapped like a credit or debit card. If the card has a PIN, you may be prompted to enter it to authorize the transaction. The purchase amount is then deducted from the card’s balance.
For online purchases, enter the gift card number and any associated PIN or security code during checkout. Many online retailers allow partial redemption; if your purchase exceeds the card’s value, you can pay the remaining balance with another method. If the card’s balance is insufficient, the system will prompt you for an alternative payment.
Understanding Gift Card Terms and Conditions
Understanding a gift card’s terms and conditions is important. Check the card’s balance online via the issuer’s website, by calling customer service, or at the merchant’s physical location. Knowing the balance helps plan purchases and avoid issues at checkout.
Federal law, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, provides protections for gift card holders. This law mandates that gift cards cannot expire less than five years from activation or the last time funds were added. Dormancy or inactivity fees are prohibited unless there has been no activity for at least twelve months, and only one fee may be charged per month. These fees must be disclosed before purchase.
If a gift card is lost or stolen, recovery can be challenging as they are often treated like cash. There is no federal requirement for issuers to replace lost or stolen cards. However, some issuers may offer replacement if you have the original purchase receipt, the card number, and if the card was registered. Promptly report the loss to the issuer to explore potential recourse.