What Is a Gift Voucher and How Does It Work?
Explore the nature of gift vouchers, how they operate, and important conditions for their practical application.
A gift voucher represents a prepaid monetary value or a specified service entitlement, typically provided as a gift. These instruments allow the recipient to acquire goods or services from a designated merchant or a network of businesses. Gift vouchers are a common feature in modern commerce, offering a flexible alternative to traditional gifts or cash.
Core Characteristics of Gift Vouchers
Gift vouchers embody a stored value that can be redeemed for products or services. This value is prepaid, meaning the issuer receives payment upfront for future goods or services. They can manifest in various physical and digital forms, including plastic cards, paper certificates, or unique digital codes sent via email or mobile applications.
The nature of a gift voucher dictates its redeemability. Some vouchers, known as “closed-loop” cards, are tied to a single retailer or a specific group of affiliated businesses, limiting where they can be used. Other vouchers, often referred to as “open-loop” or “network” cards, are issued by financial institutions like banks and can be used wherever major credit cards are accepted, offering broader utility. The specific form and issuer influence the flexibility and acceptance range of the voucher. Gift vouchers are identified by a unique number or code, which is not linked to an individual’s name.
How Gift Vouchers Function
The process of using a gift voucher begins with its acquisition. A purchaser buys a gift voucher directly from a retailer, online, or through a third-party vendor, loading it with a specific monetary value. This purchase creates a prepaid balance that the recipient can then utilize.
Upon receipt, the voucher functions as a form of payment. The recipient redeems the voucher by presenting it at the point of sale, either physically or by entering a digital code online. The value of the purchase is then deducted from the voucher’s balance. If the purchase exceeds the voucher’s value, the recipient pays the difference using another payment method. If the purchase is less than the voucher’s value, the remaining balance stays on the voucher for future use.
Understanding Gift Voucher Terms
Gift vouchers come with specific terms and conditions that affect their usability. A common condition is an expiry date, though federal law mandates that gift cards cannot expire within five years from their activation date. Some jurisdictions may have laws regarding the redemption of small remaining balances for cash.
Restrictions on use are common, such as limitations to specific departments, online-only redemption, or in-store-only use. Many vouchers state they cannot be redeemed for cash, except where state law requires it. Policies concerning lost or stolen vouchers state that they will not be replaced, treating them similarly to cash. Vouchers may have inactivity fees, though federal law limits these fees unless there has been no transaction for at least 12 months.