Is Store Credit the Same as a Gift Card?

Store credit and gift cards both represent a form of stored value for future purchases, yet they possess distinct characteristics and legal frameworks. While both facilitate transactions within a retail environment, understanding their fundamental differences is important for consumers.

What is Store Credit

Store credit is a form of currency issued by a specific merchant, usable only within that merchant’s retail ecosystem. It is typically issued as a refund for returned merchandise when a customer does not have a receipt, or when the store’s policy dictates credit over a cash refund for non-defective returns. Some businesses also issue store credit as a promotional incentive or as part of a customer loyalty program.

This credit represents a liability for the issuing merchant, allowing the customer to purchase goods or services from that specific store in the future. Store credit is generally non-transferable. Policies regarding expiration dates for store credit can vary significantly by merchant, as they are largely governed by the store’s internal rules rather than extensive federal regulation. Limitations on use might also apply, such as not being redeemable for cash or sometimes being restricted to in-store purchases if originally issued at a physical location.

What is a Gift Card

A gift card, in contrast, represents a pre-paid monetary value that can be used for purchases. These cards are typically acquired through direct purchase, often as gifts for others. Gift cards can be issued by a specific merchant, allowing purchases only at that store (closed-loop), or by third parties like Visa or Mastercard, enabling broader use wherever those card networks are accepted (open-loop).

Gift cards are generally transferable, allowing the recipient to use the value freely. Unlike store credit, gift cards often come with federal and state protections regarding expiration dates and dormancy fees. Their usability is typically broader, often redeemable for both online and in-store purchases, providing greater flexibility for the consumer.

Understanding Their Core Nature and Use

Store credit and gift cards are not the same, despite both functioning as stored value for purchases. Their fundamental differences stem from their origins and the regulatory environment surrounding them. Store credit typically originates from a return or a promotional issuance by a business, essentially a promise from the merchant to the customer for future spending at that specific location.

Gift cards, however, are purchased instruments, representing a pre-paid amount of money exchanged for future buying power. This distinction means gift cards are treated more like a payment method, whereas store credit is often subject to the issuing merchant’s more flexible terms. Consequently, gift cards tend to have broader usability and more consumer protections. The varying policies on transferability, expiration, and redemption—such as cash redemption options—further highlight that these two instruments serve different commercial purposes and carry different implications for the consumer.

Legal Protections and Consumer Considerations

The legal landscape differentiates gift cards from store credit, primarily through federal legislation. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 provides consumer protections for gift cards. Under this federal law, gift cards generally cannot expire in less than five years from the date of issuance or the last time funds were added. Dormancy, inactivity, or service fees can only be charged if there has been no activity on the card for at least one year, and such fees are limited to one per month. State laws can offer additional protections, sometimes providing more stringent requirements than the federal minimums.

In contrast, store credit typically has fewer federal legal protections. Its terms, including expiration dates and fees, are largely determined by the individual merchant’s policy, though some state laws may impose certain requirements, such as a minimum validity period of two years in some jurisdictions if not conspicuously noted otherwise. If a business declares bankruptcy, gift cards may become difficult or impossible to redeem, as gift card holders are generally considered unsecured creditors, ranking low in the repayment hierarchy. Businesses may seek court permission to honor gift cards during bankruptcy, but this is not guaranteed, and consumers may have a limited window to use them. To protect yourself, use gift cards promptly, keep purchase receipts, and understand the terms and conditions for both gift cards and store credit.