Gift card programs for small business.

A gift card program lets customers prepay for your goods or services on a branded card, physical or digital, that can only be redeemed at your business. You get the cash when the card is sold, and the person who receives it walks through your door, often for the first time.

Gift cards used to be something only chains could afford. Today a single restaurant, shop or salon can run a program on the same platforms larger businesses use. This guide covers how they work, the choices you’ll make and the rules worth checking before launch.

How a gift card program works

Behind every branded gift card is a platform that tracks balances. The card itself just carries a number, on a magnetic stripe, barcode or QR code. When you sell or redeem a card, your POS or terminal checks that number against the platform and updates the balance.

1. Sell. A customer buys a card for a set amount. You collect payment by cash or card, and the platform activates the card with that balance.
2. Give. The buyer gives it to someone else, or keeps it.
3. Redeem. The holder uses it at your business. The platform subtracts the purchase from the balance.
4. Reload. If your program allows it, the holder can add more money later.

Gift cards like these are called closed-loop cards because they work only at your business, or at your group of locations. They’re different from bank-branded prepaid cards, which work anywhere a card network is accepted and fall under different rules.

If you run more than one location, decide early whether a card bought at one store can be used at another. Most platforms support shared balances across locations, and customers expect it. Franchise groups sometimes need extra settings so each location’s sales and redemptions are tracked separately for settlement between owners.

Physical, digital or both

The first decision is format. Most businesses end up offering both.

	Physical cards	Digital cards (e-gift)
How it is delivered	Handed over at the counter or mailed	Emailed or sent to a phone
Upfront cost	Card printing and display	Little or none
Best for	Walk-in gifts, holiday displays, events	Last-minute gifts, online sales, out-of-town buyers
Branding	Custom card design	Custom email or digital design
Redemption	Swipe, scan or key in	Scan from phone or key in

Physical cards act as advertising every time they sit in someone’s wallet. Digital cards sell around the clock from your website, which helps in the days right before a holiday when shoppers are out of time. If you sell online, ask whether the platform connects to your shopping cart.

Why businesses run gift cards

• Cash up front. You collect payment when the card is sold, which can help in slow months.
• New customers. The person who receives the card may never have visited before.
• Bigger tickets. Holders often spend more than the card’s value, paying the difference with cash or a card.
• Holiday sales. Gift cards are an easy add-on at checkout when shoppers are buying for others.
• Fewer paper certificates. Electronic balances are harder to copy and easier to track than handwritten certificates.

Gift cards also pair well with loyalty. A program that rewards repeat visits can load points or rewards onto the same card, so customers carry one card instead of two. We cover that side in customer loyalty programs.

Rules and accounting to check first

Gift cards are prepaid value, and that brings rules. None of this is legal or tax advice, and the details change, so check current requirements before launch:

• Expiration and fees. Federal rules limit expiration dates and inactivity fees on many gift cards. Some states go further.
• Disclosures. Terms like expiration and fees generally must be disclosed on the card or its packaging.
• Unclaimed property. Some states treat old unredeemed balances as unclaimed property, with reporting duties for the business.
• Accounting. Unredeemed balances are usually a liability until used. Ask your accountant how to record sales and redemptions.

Settle your card terms once, print them clearly, and keep them the same at every location. That avoids disputes at the counter.

Launching a program that pays off

1. Pick a platform that fits your POS, so cashiers sell and redeem cards on the screen they already use.
2. Decide on formats: physical, digital or both, and whether cards can be reloaded.
3. Set amounts. A few fixed amounts sell faster than an open field, with a custom option for larger gifts.
4. Display them at the register and on your website. A gift card nobody sees doesn’t sell.
5. Train staff to mention cards during busy gift seasons and to check balances for customers.
6. Review the reports. Watch cards sold, cards redeemed and outstanding balances. If you have several locations, make sure the platform reports across all of them. See multi-location payment reporting.

If you’re shopping for a new POS anyway, ask about gift card support up front. Our POS system buying guide lists it among the features worth checking.

What PayZoom does

PayZoom sets up gift and loyalty programs through our partners Givex and Factor4, alongside your card processing. Because we’re platform-agnostic, we look at the POS, terminal or cart you already run and match a gift card setup that works with it, rather than asking you to replace your system.

Parts Plus, for example, endorses PayZoom to its members for card processing, ACH, check protection and gift and loyalty card programs. Call 866.242.4325 and a real person will walk through the options, or send a recent statement for a free statement analysis while you’re at it.