Small business gift cards: Types, benefits, and how to set them up in 2026

From boosting sales to building brand awareness, small businesses gift cards have many perks. If you’re looking for new ways to drive profits, setting up personalized small business gift cards 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) includes provisions that set standards and consumer protections for gift cards. 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. For instance, some states allow customers to redeem gift cards for cash if the balance is less than $5. Others allow it only for balances less than $1. Your local state tax commission may be able to answer any specific questions you have regarding gift cards in your area.

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.

• Gift card benefits
• Types of gift cards
• How do I set up a gift card program?
• How much do physical gift cards cost?
• How to choose the right gift card program
• Examples of gift card POS systems
• Holiday gift card considerations
• Tips to maximize gift card sales

How do gift cards benefit small businesses?

There are many reasons to set up gift cards for your small business. Here are some of the benefits.

Gift cards can increase your business 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. 

What’s more, when spending gift cards, 61% of people say they spend more than the value of the gift card they’re redeeming, according to a survey by Capital One Shopping. 

They attract new customers

Gift cards are an effective part of word-of-mouth marketing. 57% of people say receiving a gift card would prompt them to try out a new business, such as a restaurant or retail establishment, according to a consumer gift card trends report by Bank of American and TSG. 

Gift cards bring customers back after the holiday rush

76% of consumers say they use their gift cards entirely within one month of receiving them, per the Capital One survey. That’s good news for retailers who would otherwise see a post-holiday slump in sales. 

They help establish loyal customers

Gift cards can help build customer loyalty. It feels good to receive a “free” gift card when you’ve made a large purchase or bought a certain number of gift cards—good enough to keep coming back again and again. 

They provide customer satisfaction

Nine out of 10 customers say it’s important to support small businesses, according to a holiday shopping report by Intuit QuickBooks. Purchasing gift cards for those small businesses satisfies that conviction.

They increase brand awareness

If yours is a multi-entity business, consider listing your other brands on your gift card in small print—particularly if there’s overlap in your clientele. It’s a great way to make new and old customers alike aware of your other offerings. 

What are the types of small business gift cards?

There are two types of gift cards for small businesses: 

• 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 almost anywhere. Common examples include Visa or Mastercard gift cards. 

Other variations of open-loop gift cards include: 

• Restricted program gift cards: These are prepaid cards that have limits on how and where they can be used (unlike general-use gift cards). The most common restriction is location. For instance, the card may only be usable at a particular group of businesses within a defined location, like a shopping mall.

Pros of open-loop gift cards: 

• More flexibility for the recipient
• They can be used anywhere that accepts their processing system 
• Work like cash 

Cons of open-loop gift cards: 

• It’s not guaranteed that they’ll be used at your business 
• Sometimes carry activation fees 
• May 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. They’re also what most people likely think of when they picture receiving a gift card for a certain business. 

Typically, closed-loop gift cards are free to activate—neither the small business owner nor the customer has to pay additional fees. 

These are some variations of closed-loop gift cards: 

• Merchant bank program: These are gift cards that are issued by a bank on behalf of a specific business. They can only be used at that business. The merchant bank then handles the processing and reconciliation of these payments. 
• Membership cards: These are gift cards that pay for membership or member services at a specific business, like a gym or retailer. 

Pros: 

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

Cons: 

• Limited flexibility 
• Unless your gift card works online, your customer will only be able to use it when they visit your physical location; that can be a tricky barrier for some individuals

Features that closed- and open-loop cards have in common

There’s plenty of overlap between open-loop and closed-loop gift cards. Here are two:

Branding

When applied to open-loop cards, a branded prepaid card typically displays both the business’s name and the name of a major payment network like Visa or Mastercard. However, while your business’s name is on the card, the card itself can be used anywhere. These are commonly given to employees as gifts or to salespeople as incentives.

Conversely, an open-loop branded gift card is simply that—a gift card that has your business’s name on it.

Reloadable vs. single-use

In most cases, both open- and closed-loop gift cards can be reloaded.

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

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 type

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 your 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. The recipient of the gift card will be able to apply the balance to their online order or show you their ecard in-store, using their smartphone.

The fees associated with eGift cards vary by processor but typically include a small percentage of the overall purchase plus a few cents. Square, for example, requires a “credit card-not-present” processing fee of 2.9% + $0.30 for cards sold online through Square’s eGift Card order site. eGift cards sold through the Square app come with a credit card processing rate based on Square’s standard card processing rates.

Gift certificates

Gift certificates are a unique option that offer a personalized touch to the gift-giving experience. Compared to gift cards, they cost less upfront to print, are simple to issue for single-use, and meet some givers’ requirements for a physical item. Spas and other high-end experiences often provide gift certificates to clients who ask for them. 

That said, gift certificates are far less secure than gift cards. Easy to replicate, gift certificates open businesses up for fraud and are not the most reliable option. 

Tip: To sell a gift certificate in Intuit QuickBooks, you’ll need to first add the gift certificate as a product. You can also give credit for a gift card balance.

Electronic strip or barcode gift cards

The last option is a physical gift card or plastic gift card 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 pricier 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 small business 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. 

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 small business 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 your team 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 much do physical gift cards cost? A comparison chart for business owners

Plenty of companies offer plastic gift cards. Nearly all seem to offer custom designs, while some offer additional services like die-cuts, biodegradable materials, or free shipping. Here are five major retailers to consider.

How to choose the right gift cards for your business

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’re considering 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 or ecards as well?

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? 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. 

Are there other tools that need to be integrated?

Small business gift cards 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. 

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. 

Toast

Toast is a cloud-based POS system specifically designed for restaurants and other food service businesses. It offers physical and e-gift cards, which customers can use when ordering online or in-store. Customers can also schedule when they want their gift cards sent and check their balance at any time. 

Shift4

Shift4 is an integrated, single platform company that combines POS software, hardware, and payment processing to meet online and in-person sales needs. They offer both physical and eGift cards, and some of their specialties include corporate gifting, experience cards, employee allowances, and donations.

Holiday gift card considerations

Small business gift cards are in high demand during the holidays—especially for shoppers who are looking for a last-minute gift. Three out of four shoppers purchase their holiday gift cards in October, November, and December, with November being the most common choice, according to a 2024 study by TSG and Bank of America.. It’s essential to take advantage of the festivities and increase your sales during the holidays.

Below are some considerations for holiday gift cards: 

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.

Tip: Offer a festive or wintery-looking gift card design during the holidays. 43% of holiday shoppers say they prefer such gift cards, according to the Capital One survey. 

Give away to charities

For the holidays, consider donating a portion of your gift card proceeds to a local charity. Other popular charities for small businesses to donate to include:

• Toys for Tots
• Make-A-Wish
• 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 consider your designs and release date ahead of time. This will help you avoid last-minute holiday stress. 

You can also look at data from previous holidays to determine when is the best time to launch your holiday gift card campaign.

Here are some holiday-themed gift card holders you can use in your store.

Know the sales tax implications of gift cards

Here’s how and when sales tax is applied to gift cards:

• No sales tax at the moment of sale: When a gift card is purchased, it’s treated as an exchange of cash for a promise of future goods or services. Therefore, it’s a liability, not a taxable sale. For example, a person might purchase a $25 gift card. They would only pay $25 for that gift card. 
• Sales tax is collected at the time of redemption: When the customer comes in and uses their gift card, that’s when sales tax is collected. The value of the purchase determines the sales tax owed at that time.

How to maximize gift card sales

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. 

Market your gift cards in store

Help 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 revisit your store. 

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

Incorporate gift card promotions

Gift cards for small businesses can be used 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. 

Tip: Here’s an example. Say you own a shoe store. During Small Business Saturday, offer a $20 gift card with the purchase of two pairs of running shoes. 

Can I custom design my gift cards?

Yes! And in fact, you absolutely should take the time to custom design your gift cards. Keep in mind that one of this year’s holiday trends is themed gift cards that fit the occasion. 63% of buyers prefer themed gift card designs over store-branded options, according to the consumer gift card trends report. 

As for the design itself, consider adding fun colors, images, textures, and typefaces while making sure your selections fit with your brand’s style. Creative resources like Canva are great for crafting new designs on a budget, while Moo Print, Vistaprint, and Duracard can help with tasks like printing cards, creating card holders, and making gift certificates. 

Tip: Release a limited edition design so customers will be more motivated to get it before it’s gone. 

Make sure gift cards are convenient and easy to use

Customers want small business gift cards to be easy to use. In fact, 52% of consumers say they purchase gift cards because they are convenient, according to the Capital One survey. 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 

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.