How Does the Gift Card Buying Transaction Work?
Learn how gift card transactions work from a buyer's perspective. Understand the purchase process, costs, and what to do after buying.
Gift cards represent a form of prepaid monetary value that can be used for purchases. They have become widely adopted as a convenient gifting option and a flexible payment method for consumers. These cards provide a straightforward way to offer a specific spending amount without selecting a particular item.
Types of Gift Cards and Purchase Locations
Gift cards are generally categorized into two main types based on where they can be used. Store-specific gift cards, often referred to as closed-loop cards, are issued by a particular retailer or a group of affiliated merchants and can only be redeemed at those locations. Examples include cards for specific department stores, coffee shops, or restaurant chains. These cards typically feature the brand’s logo.
Network-branded gift cards, also known as open-loop cards, operate more like prepaid debit cards. They bear the logo of major payment networks such as Visa, Mastercard, American Express, or Discover. This allows them to be used wherever that payment network is accepted, offering broad flexibility for the recipient.
Consumers can purchase both physical and digital gift cards from various sources. Physical cards are commonly found in retail environments like grocery stores, pharmacies, and general merchandise stores. Digital gift cards, or e-gift cards, are typically bought online directly from a retailer’s website or through third-party gift card marketplaces. These online platforms facilitate immediate delivery.
The Gift Card Purchase Transaction
The process of buying a gift card begins with selecting the desired card and its monetary value. For physical cards, buyers choose a card from a display, while for e-gift cards, the selection occurs on a website. Most gift cards offer pre-set denominations, such as $25, $50, or $100, though some may allow for custom amounts to be loaded.
Payment for gift cards can be made using various methods. Traditional options include cash, credit cards, or debit cards. Increasingly, digital payment methods such as Apple Pay, Google Pay, PayPal, and even cryptocurrency like Bitcoin are accepted by online gift card vendors. The availability of payment options can vary depending on the seller and the type of gift card.
The value is loaded onto the card and activated at the point of sale. For physical cards, this activation typically occurs when the cashier scans the card and processes the payment, linking the unique card identifier to the purchased value within the retailer’s system. Without this activation, the card holds no monetary value. E-gift cards are generally activated automatically upon successful completion of the online transaction.
Understanding Gift Card Value and Associated Costs
When purchasing a gift card, the buyer pays for the specific monetary value that will be available for the recipient to spend. This is known as the face value of the card. For instance, buying a $50 gift card means $50 will be loaded onto it for use.
Some gift cards, particularly network-branded (open-loop) cards, may incur an additional upfront purchase or activation fee. This fee is added to the card’s face value at the time of purchase. These fees can range from approximately $2.95 to $6.95, varying based on the card’s value and the issuer.
In contrast, most store-specific (closed-loop) gift cards typically do not have these purchase or activation fees, meaning the buyer pays only the face value. Once purchased and activated, most gift cards, especially closed-loop ones, generally do not carry ongoing maintenance fees.
After Your Gift Card Purchase
Once the gift card transaction is complete, buyers should take steps to safeguard the card or its information. Physical gift cards should be treated like cash and stored in a secure location to prevent loss or theft. For e-gift cards, it is important to protect the digital codes or links, as these grant access to the card’s value.
Buyers can often verify the loaded balance on the gift card after purchase to confirm the correct value was applied. This can typically be done by visiting the card issuer’s website, calling a toll-free number provided on the back of the card, or sometimes by presenting the card at a store.
Retaining the purchase receipt or digital confirmation email is important. This proof of purchase serves as a record of the transaction and activation. In cases of a lost or stolen card, or if there are discrepancies with the loaded value, this documentation can be essential for resolving issues with the issuer.