a POS screen on a counter next to a stack of holiday giftcards
payments

Gift cards for small businesses: Program options and how to set them up

From boosting sales to building brand awareness, implementing a gift card program for your business has many perks. If you’re looking for new ways to drive profits, a gift card program may be for you. Whether you’re a bakery, clothing store, or beauty salon, a gift card program can be beneficial in many ways, especially during the upcoming holiday season. 

Before you start your gift card program, be sure to familiarize yourself with the applicable federal regulations.

  • The 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD) sets standards and consumer protections for gift cards. Most importantly, the law prohibits gift cards from expiring within five years from the date of activation. It also limits inactivity fees, except in some circumstances.
  • Gift card laws can vary by state. Check the National Conference of State Legislature’s website for any applicable gift card laws in your area. You can also reach out to a legal professional for more comprehensive advice on gift card laws.

Read more to learn about how to set up a gift card program, different options available, how to set them up, and tips to maximize your gift cards.


Do gift cards help small businesses?

bullet points explaining the benefits of gift cards

There are many reasons why you should consider setting up a gift card program. Some benefits include:

  • Increasing your revenue: When a customer buys a gift card, you earn that revenue instantly. You collect the payment upfront and remove purchases from your stock when customers redeem their cards. 
  • Attracting new customers: Existing customers can give gift cards to a friend or family member who doesn’t know about your store. It’s a great way to promote word-of-mouth marketing.
  • Generates loyal customers: Once a customer purchases a gift card, they have to return to your store to use it. Customers may even spend more than the gift card’s balance, meaning more revenue for your store. 
  • Establishes relationships with customers: You can use gift cards to help build customer loyalty. For example, you can give them out to those who spend a certain amount or provide a promotion based on how many gift cards someone purchases. 
  • Provides customer satisfaction: Customers will be satisfied knowing that they’re supporting a small business through the purchase of a gift card. 

Read on to learn how to set up a gift card program for your small business.

Gift card programs for small businesses

It may seem like all gift cards are the same, but there are different variations for each type of program. The types of gift card programs for small businesses include: 

  • Open-loop gift cards 
  • Closed-loop gift cards 

Learn more about these gift card programs below.

Open-loop gift cards

Open-loop gift cards are cards that customers can purchase at one location but use them at multiple locations. Common examples include Visa or Mastercard gift cards provided by select vendors. 

Other variations of open-loop gift cards include: 

  • Restricted program: The gift cards in this option may only be offered in specific regions.
  • Branded program: Branded gift card options have your business’s name on them, but can be used anywhere. 

Pros: 

  • More flexibility
  • Can use anywhere that accepts their processing system 
  • Works like cash 

Cons: 

  • Doesn’t guarantee that the gift card will be used at your business 
  • Sometimes carries activation fees 
  • Can charge inactivity fees

Closed-loop gift cards

Closed loop gift cards are gift cards that customers can only purchase and use at your business. These gift cards provide less flexibility to the consumer but more profit to the small business issuing them. Typically, closed-loop gift cards are free to activate—neither the small business owner nor the customer has to pay additional fees. 

There are also two additional types of closed-loop gift cards: 

  • Merchant bank program: Certain merchant banks offer these gift cards that customers can use at your business only. 
  • Vendor program: The gift cards are created by a vendor who handles the merchant gift card program for you. 

Pros: 

  • Free to activate 
  • Can only be used at your business 
  • Encourage repeat customers 

Cons: 

  • Limited flexibility 
  • If the customer doesn’t live near one of the stores, they’ll be unable to use the gift card (unless there’s an online store option)

How do I set up a gift card program? 5 steps

a list of 5 steps to start a gift card program with a hand holding a green gift card with snowflakes

Looking to add gift cards to your small business? Learn how to jumpstart your gift card program in five simple steps. 

1. Choose your gift card processor

First, choose how you plan to process your gift card orders. For many small businesses, the easiest option might be to use whatever gift card option is in their point of sale (POS) system. 

You can also purchase them from vendors and create a new “item for sale” in your POS system. Another option is to buy them through a bank that offers the service. Once you choose how you’ll process cards, you’ll need to order them. 

Online or egift cards

By partnering with your POS system gift card provider, you may be able to offer gift card purchases online. Just like any e-commerce transaction, items are processed online. When customers are ready to purchase in-store or online, they can print electronic cards or show them to you on their smartphones. 

With ecards, your business may have to cover a small payment processing fee (usually around $0.30). These gift cards will usually appear as a barcode, an identification number, or both.

Gift certificates

While a bit of an old-school option, you can use gift certificates if you don’t have a POS system that can track gift cards. Instead, you can print your certificates and track purchases in a digital ledger or create a new line item in your POS system. 

Some businesses also use a mix of gift cards and gift certificates. For example, a spa might offer a gift card for any purchase and a certificate for a “free massage.” However, gift certificates can be easy to counterfeit and aren’t the safest or most reliable option.

Electronic strip or barcode gift cards

The last option is a physical gift card or plastic gift cards that you will order from your POS provider, a merchant bank, or a third-party gift card vendor. These cards often look like credit cards with magnetic strips, barcodes, and identification numbers. 

Many vendors will provide you with customizable options to include your brand information on the card. Although they can be a pricer option, customers may prefer the physical card over a paper certificate or ecard.

2. Order physical gift cards

If you have a physical location, you’ll need to order gift cards. You can do this through a third party or a vendor depending on your preferences. Ensure that you customize your order to include your brand logo, company name, preferred design, and any other details. 

Tip: Ordering gift cards in bulk reduces costs.

3. Input gift cards into your system

Each POS system will have a different method for inputting your cards, but they’re all similar. Most commonly, you’ll just scan or swipe a blank card. Then, you’ll be prompted to choose the amount of money for that card. 

Your customer pays the amount on the card to complete the transaction. When customers come in to use a gift card, the gift card should appear as an option for tender in your POS system. 

4. Establish gift card policies for your team

Once you have your POS system set up for gift cards, educate your team on how it works. Share how to process gift card transactions and how customers can make purchases with gift cards. You’ll also want to inform them of any limitations you have on gift cards. Policies might include:

  • Limiting the number of gift cards customers can purchase
  • Not allowing customers to buy gift cards with gift cards

Other things to consider are how to track purchased cards and set expiration dates that follow federal guidelines.

5. Start selling and tracking gift cards

Now that your staff is on the same page about the rules surrounding the gift card program, you can start selling gift cards online or in your store. If your POS system allows, you might track gift cards by attaching them to customer profiles in your system.

How to choose the right gift card program

With so many gift card system options, it may be daunting to figure out which one is right for you. Ask yourself the following questions to help you choose the best gift card processor for your small business.

Is the gift card program flexible?

You should ask yourself if the platform you want to choose will be able to support your business, both currently and in the future. Certain platforms support a different number of gift card options. 

For example, if you’re a small business that’s just starting out, you may only need one or two different platforms. If your small business is rapidly growing and is of a larger size, you may want to choose a platform that can support a wider range of gift card options and campaigns. 

What kind of gift cards do you want to sell?

Determine what type of gift cards you want your small business to sell—this may help you figure out what software is best suited for you. For example, do you want to sell only physical gift cards?

Where are the gift cards being sold?

Consider how your customers are obtaining your gift cards. Is your business only in-store? Do you have an online store? Both? You will need a gift card processor that is available for the right customer base. 

Also, consider location. For example, if you’re supporting a gift card program for people throughout the United States versus just one or two cities, you’ll want to ensure that the gift card platform will work for people who live in various locations and can be delivered to them. 

Are there other tools that need to be integrated?

Gift card sales are part of the overall customer experience. To boost customer satisfaction, you may want to pair your program with other tools to help you gather analytics and other insights on customer behavior and sales patterns. 

For example, if your small business has customer relation management (CRM) software, you may want to choose a gift card platform that can integrate with that tool. 

Examples of gift card POS systems

There are many POS systems that offer gift card capabilities. Below are some examples of gift card POS systems that you can integrate into your small business. 

Square

Square is a POS that has online gift card capabilities. If your small business already uses Square, it can be especially easy to integrate this gift card program—and it’s free to set up.

Physical gift cards are also offered through Square—custom gift cards are an option as well. Square is also a closed-loop gift card program. 

Cost: Free to use; 2.9% + $0.30 processing fee per gift card

Lightspeed

Lightspeed is another POS system that offers gift cards in an open-loop program. In addition to selling digital gift cards and physical gift cards, this software also issues printable barcode gift cards and promotional gift cards, and allows gift card tracking, history, and details. 

Cost: $69/month for the terminal; 2.6% + $0.10 processing fee per gift card 

Revel

Revel is a POS system that offers personalized onboarding and is great for small businesses of all sizes. Revel also provides gift cards that customers can reload, as well as tracking and reporting capabilities. Revel offers a closed-loop gift card program.

Cost: $99/month for the terminal; 2.49% + $0.15 processing fee per gift card

Holiday gift card considerations

holiday gift card tips for small businesses

Gift cards are in high demand during the holidays—especially for shoppers who are looking for a last-minute gift. In fact, about 48% of all gift card sales occur in December. With that being said, it’s essential to take advantage of the festivities and increase your sales during the holidays.

Below are some considerations for holiday gift cards: 

Consider exclusive (yet inclusive) packaging:

Each holiday season, aim to have a unique gift card design or gift card sleeve. Think of this as similar to Starbucks' holiday cup designs. To stand out from the crowd, you can also consider using sustainable packaging.

Give away to charities

For the holidays, consider donating a portion of your gift card proceeds to a charity, such as Make-A-Wish. Other popular charities for small businesses to donate to include:

  • Toys for Tots
  • Feeding America
  • Coats for Kids
  • Operation Christmas Child

Focus on Black Friday

Black Friday is a massive holiday for retailers and gives customers a head start on holiday shopping. Be sure to run gift card promotions for this day.

This doesn’t only apply to retailers; you can still take advantage of gift cards for your services. Also keep these considerations in mind for other holidays and events, such as Valentine’s Day, Mother’s and Father’s Day, store anniversaries, and more.

Ensure the timing is right

Make sure that you plan ahead for the holiday season and plan your designs and release date. This will help you avoid last-minute holiday stress. September and October are the calmer months before holiday festivities are in full swing, so consider your holiday gift card planning then.

You can also look at data from previous holidays—this can help you determine when the best time to launch your gift card holiday line is.

Additionally, be sure to print out these holiday-themed gift card holders below to have in your store or to add to an existing gift card you want to give someone.

Tips to maximize your gift card program

Looking to get the most out of your gift card program? Here are several tips to ensure your small business maximizes sales with gift cards. 

Ensure you market your gift cards in store

Make sure customers notice your gift card program by marketing it within your store, whether it be a physical location or online. To do this effectively, you can: 

  • Display your gift cards at your checkout counter(s) 
  • Have your employees offer them to customers when they pay 
  • Promote your gift cards online and on social media, especially around a holiday

Note: To further market your gift cards, consider adding a link in your email template that points users to your gift card page. 

Utilize them in your return policy

If a customer doesn’t have a receipt with them and they want to return a product, you can use gift cards as a way to mitigate the issue and also give them a reason to continue to shop at your store—the customer is happy that they got to return their product and you still benefit from their business in the future. 

Note: Giving the customers a gift card instead of cash when they return products without a receipt can help reduce fraud.

Incorporate gift card promotions

You can also use gift cards as part of a promotion or marketing campaign. To do this, you can reward your customers with a gift card if they spend a certain amount at your store. 

Additionally, if you’re looking to phase out a product from your store, you can use gift cards as a way to entice customers to buy that particular product. 

Note: A gift card promotion can include giving away a $20 gift card to customers who purchase a specific pair of running shoes from your workout line. 

Prioritize the design of your gift card

Looks matter when it comes to gift cards—making sure that the design of your gift card, like the sleeve that holds it, is eye-catching and well thought out to help motivate customers to purchase them.

This helps too when people are looking for a gift card to give someone—no one wants to receive a lackluster gift card. When designing your gift card, consider adding fun colors, images, textures, and typefaces all while making sure it fits with your brand’s style

Note: You can even release a limited edition design so customers will be more motivated to get it before it’s gone. 

Make sure they’re convenient and easy to use

Customers want gift cards to be easy to use. To make sure your gift card is convenient for the customer, you can ensure that the gift card: 

  • Works both in person and online
  • Can be used at any store location
  • Has a simple way to view the gift card’s balance 
  • Doesn’t carry fees (some Visa gift cards charge inactivity fees)
  • Can be replaced if stolen or lost 

Note: Be sure to give your shoppers more options and offer both physical and e-gift cards.

Boost profits with small business gift cards

As your small business sells gift cards, you’ll be able to accept those profits upfront and reap the benefits, especially during the holiday season. Gift cards can be a helpful payment method for customers and a great way to generate extra cash flow—your customers will be happy to support you and look forward to shopping with you in the future.

In addition to selling gift cards, your business can take advantage of QuickBooks Payments to help simplify how customers pay you.


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