In simple terms, a gift card works by linking a unique card number to a balance stored in a gift card system or point-of-sale system. While the card itself may include a barcode, magnetic stripe, or printed number, the actual dollar value is typically tracked in a database rather than stored on the physical card.
When a gift card is purchased, it is activated and loaded with a balance. That value is tied to the card's unique number. When the card is redeemed, the business scans, swipes, or enters the card number, and the system checks the balance, deducts the purchase amount, and updates the remaining value. If there is still money left on the card, it can be used again until the balance reaches zero.
When reviewing your gift card options, it is helpful to understand open loop vs closed loop options.
A closed loop gift card can only be used with a specific business or brand. For example, if a restaurant, retail store or entertainment venue sells a gift card that can only be redeemed at its own location, that is a closed loop gift card. This is one of the most common options for businesses because it helps keep spending tied directly to the brand.
An open loop gift card works differently. These cards are usually connected to a major payment network and can often be used at multiple businesses. While open loop cards offer flexibility, many businesses prefer closed loop programs because they support stronger branding and encourage repeat visits.
There are several different types of gift cards depending on your business goals.
Some businesses offer digital gift cards, while others focus on physical gift cards. Physical gift cards continue to be a strong option because they give customers something tangible to purchase, gift and carry. They also create a more visible brand presence and can feel more personal in a retail or hospitality setting.
Gift cards can also vary in how they are produced and used. Depending on your program, they can be produced in durable plastic or premium paper. Both can include barcodes or numbering, but magnetic stripes are only available on plastic cards.
A common question we hear is, why should my business offer gift cards?
Gift cards can support your business in several ways. They can help bring in revenue before a product or service is redeemed. They can attract new customers when a card is given as a gift. They can also encourage repeat traffic and strengthen customer loyalty over time.
For many businesses, gift cards are not just a payment tool. They are also a marketing tool. A well-designed gift card can reflect your brand, create a polished customer experience, and make your business more memorable.
Even as digital options continue to grow, physical gift cards still play an important role in today's market.
They are easy to display, easy to gift, and often feel more intentional for the customer. In many industries, physical gift cards remain a valuable part of the customer experience. They also give businesses the opportunity to create a custom-branded product that stands out.
So, how do gift cards work? They work by connecting a unique card number to a stored balance in your POS or gift card system. Once activated, the card can be redeemed, tracked, and reused until the balance is gone.
Whether you are comparing open loop vs closed loop options or exploring the different types of gift cards available, the right program can help support both your customer experience and your business growth. For many brands, a closed loop physical gift card is a practical and effective place to start.
Whether you're ready to order or still exploring, we’re here to make the process simple. Contact us to get started.