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How to accept gift cards for small business

Editorial Team

3 min read

Accepting gift cards for your small business is a simple, effective way to help improve sales. Gift cards are easy, convenient options that take the guesswork out of gift giving and allow the recipients to purchase the item or receive the service they desire.

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There are many benefits of accepting gift cards. Here are just a few:

1. Generate brand awareness – With designs customized to display your business’ brand, logo, and colors, each gift card works as an advertisement.
2. Acquire new customers – Gift cards help bring in new customers that might not otherwise shop in your store or eat at your restaurant.
3. Eliminate “cash back” – By providing cards with store credit balances, you do not have to give cash back for returns and exchanges.

What you need to accept gift cards

If you already accept credit and debit card payments at your brick-and-mortar store or on your eCommerce website, then you’re ready to accept gift cards, depending on the type.

To accept gift cards, you’ll need a:

There are two types of gift cards:

  • Closed Loop – This is a self-branded gift card that can only be used at your business. The closed loop system restricts card usage outside of your business or any businesses within that system.
  • Open Loop – This is a gift card that is generally branded with a Visa or Mastercard logo. It can be used to pay for items wherever those card brands are accepted, since payments are processed through the card network.

How to process gift cards

If you plan to offer closed loop gift cards, you’ll need to implement gift card program software with your POS system or eCommerce website to track your gift card purchases. This can potentially be set up through your credit card processor or managed by a third-party company.

To process a closed loop card:

  1. Customer purchases a card.
  2. You swipe the card on your POS device to activate the card and add the value.

When the recipient redeems the card, it can either be swiped at the terminal or entered online in the checkout form. The program deducts the amount from the balance.

Processing an open loop card is the same as processing a regular credit card. The customer swipes the card at the terminal or enters the information on the website. The acquiring bank sends the transaction to the bank that issued the gift card for authorization and payment. If there is enough balance to cover the purchase, the transaction is approved. If not, the transaction may be declined, or the remaining balance on the card may be applied to the purchase amount and then the customer must complete the sale with a different payment method.

Do you need a gift card program for your small business?

Clover makes it easy to accept gift cards, manage account balances, and reload cards through your POS system. To learn about accepting digital or physical gift cards at your business, schedule a free consultation with our merchant services team today.

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