Small Business Gift Cards Guide & Best Digital Gift Card Systems

Here are a few examples of the types of gift cards you can purchase to see what might be the best fit for your business.

Digital Gift Cards

Digital gift cards (also known as electronic or “eGift” cards) give customers the ability to purchase gift cards online, which can be sent to a friend or used by the customer on your website or in your store. They are also more affordable to sell—while eGift cards have no production cost, traditional gift cards cost about $1 each to produce.

Some electronic gift cards have a numerical code that you can redeem from your terminal, like a regular credit card transaction. Other programs feature a regular barcode or a QR code (2D barcode) that your business’s POS system can scan from the customer’s phone or printout. Customers may be able to add their cards to a digital wallet (e.g., Apple Pay) on their phones.

Barcode Gift Cards

A gift card with a barcode acts as a unique account for the customer that uses it. You can store and search a customer’s information via their account using a barcode scanner. When the gift card’s balance hits zero, there is usually the option to reload it. Barcodes tend to be popular for membership or customer loyalty programs because they are quicker to scan and don’t require as much data security.

Digital gift cards that use barcodes can be scanned from a phone or printed piece of paper. You can also use gift cards with QR codes, a type of barcode that requires either a 2D barcode scanner or a smartphone/iPad/tablet to read.

Magnetic-Stripe Gift Cards

More often than not, physical gift cards use magnetic stripes, as they have superior data security compared to barcodes. These reloadable cards swipe through your credit card terminal the same as any debit or credit card, and the amount gets automatically deducted from the customer’s account information stored on the stripe.

The only issue with magnetic stripes is that if the card is stored for a long time in a wallet or purse, the stripe can eventually wear out, and it can be difficult to look up the customer’s information in your system. Ideally, the card should also have a printed number that you can look up. Some magstripe cards may also have a barcode.

What About Gift Certificates?

Fun fact: Due to people using counterfeit gift certificates, Blockbuster invented the gift card in 1994. In addition to the counterfeit risk, gift certificates also aren’t reusable or reloadable, which can make it less likely that the customer will spend more at your business than whatever the certificate entitles them to. And being made of paper, certificates are far less durable than gift cards and more difficult to track and manage credit for if the customer doesn’t spend the entire balance.

However, gift certificates can still be advantageous, especially for certain business types. Generally, gift certificates are more effective for services rather than for monetary amounts (for example, a spa service or hotel stay). Gift certificates are also less costly to produce than gift cards so that could also be a consideration.

Most modern POS systems offer some type of built-in gift card functionality. Offering cards through your POS is the easiest way to get started, and it ensures that your program works with your POS. A POS with an in-house gift card program makes things easier in terms of gift card payment processing and reporting. You can easily track both gift card sales and redemptions and generally see how well your gift card program is going.

You can also shop around and select your own gift card company directly if you have specific or unique needs that your POS system’s gift card functionality doesn’t provide. But if you plan on using these cards with your POS, make sure that they’re compatible first. If you already have a gift card provider from a third party, some companies have a system in place that allows you to transfer your information into their program seamlessly.

In some cases, a company may opt for a standalone gift card company because they use a very basic POS that doesn’t have any gift card integrations, the price is too high, etc. If the gift card company you want to use does not work with your POS, you will need to use a workaround to process gift card transactions separately from regular transactions.

A digital-only gift card option can be an easier, greener way to offer gift cards without spending too much on plastic—and may even allow you to avoid integrating your POS if you don’t want to. GiftFly, Gift Up!, Yiftee, and Givex are some examples of eGift card companies/apps for small businesses. As mentioned, many cloud POS providers offer digital gift card options too, and many POS systems also integrate with third-party gift card apps.

Gift cards can be a great asset for small businesses. They provide a way to entice new customers or encourage loyalty from regulars. Selling gift cards can boost cash flow in an emergency, as seen during the COVID pandemic.

Businesses make money on gift cards in two ways. One, gift cards can encourage customers who otherwise wouldn’t shop at the business to spend money. Two, customers paying with small business gift cards tend to spend more than the card’s monetary value — meaning businesses make bigger sales.

Some small business gift cards are designed to be reloadable. However, not all cards support this feature. Depending on the business, offering reloadable gift cards may be an effective way to encourage brand loyalty.

Gift cards are activated at the time of purchase. Buyers specify the amount to be loaded on the card. Businesses complete the activation process through a POS system or credit card terminal. Until the merchant activates the card, it has no value.

Small businesses can get gift cards through several channels: payment processors and POS software providers typically offer gift card programs for their clients. A business can also turn to third-party gift card manufacturers.