You receive a gift card, check the balance, and then realise you are not sure how to use it. Maybe it is for a store you do not shop at, or it was issued for another country.
A gift card can be useful, but it does not work exactly like cash or a regular bank card.
So, what is a gift card, and how does it work?
A gift card is a prepaid payment method loaded with a specific amount of value. It can be used to pay for eligible products or services based on the card issuer's terms.
This article explains how gift cards work, the main types you may encounter, how balances are used, and what you can do with an unwanted gift card.
What Is a Gift Card?
A gift card is a prepaid payment method that contains a specific amount of value.
For example, someone might give you a $100 gift card for a retailer. Instead of receiving $100 in cash, you receive $100 that can be spent according to the gift card's terms.
The value is usually linked to a card number, code, PIN, account, or another identifier.
Gift cards are commonly used as:
- Gifts
- Employee rewards
- Promotional incentives
- Refunds or credits
- Payments for specific products and services
Unlike a debit card, a gift card is not normally connected to your personal bank account. Its value is provided in advance.
How Does a Gift Card Work?
The basic process is simple.
1. The Gift Card Is Purchased or Issued
Someone purchases or receives a gift card with a specific value.
For example, a person may buy a $50 gift card for a friend.
2. Value Is Added to the Card
The card is loaded with the amount paid for it. Depending on the card, activation may happen at purchase or through another process.
Digital cards may be delivered as an electronic code.
3. The Recipient Receives the Card
The recipient may receive a physical card or a digital gift card.
A physical card is usually made of plastic. A digital card may be delivered through email, an app, or another electronic channel.
4. The Card Is Used
The recipient presents the card or enters its information when making an eligible purchase.
The merchant or service checks the card details and available balance.
5. The Purchase Amount Is Deducted
The amount spent is deducted from the card's balance.
For example, if you have a $100 balance and spend $25, you may have $75 remaining.
The exact process can differ between issuers and card types.
What Can You Use a Gift Card For?
What you can buy depends on the specific gift card.
A gift card may be designed for:
- Retail purchases
- Gaming
- Digital services
- Food and restaurants
- Fashion and lifestyle products
- Entertainment
- Online purchases
For example, a gaming gift card may provide credit for games or digital content, while a retailer gift card may be used to purchase products from that retailer.
Some cards have broader acceptance. Others are restricted to one brand or service.
This means you should always check the card's terms before trying to use it.
What Information Does a Gift Card Contain?
The information on a gift card depends on its format and issuer.
A physical gift card may include:
- Card number
- Barcode
- PIN
- Security code
- Expiry information, where applicable
- Instructions for checking the balance
A digital gift card may contain a redemption code, PIN, or other information required to access the value.
Keep this information private. Someone who obtains a usable gift card code may be able to redeem the balance.
Physical and Digital Gift Cards
Gift cards generally come in two formats.
1. Physical Gift Cards
A physical gift card is usually a plastic card that can be handed to someone or delivered by mail.
It may contain a barcode, card number, PIN, or other information needed for redemption.
2. Digital Gift Cards
A digital gift card, sometimes called an e-gift card or e-code, is delivered electronically.
The recipient may receive the code through email, an app, or another digital channel.
The key difference is the format. Both can represent prepaid value and both may have specific usage restrictions.
For a deeper comparison, see the article on physical vs digital gift cards.
Open-Loop and Closed-Loop Gift Cards
Gift cards can have different acceptance models.
1. Closed-Loop Gift Cards
A closed-loop gift card is generally associated with a particular retailer, brand, service, or group of participating merchants.
For example, a store-specific gift card may only be used for eligible purchases from that retailer.
2. Open-Loop Gift Cards
An open-loop gift card is generally associated with a payment network such as Visa or Mastercard. Depending on its terms, it may be accepted at multiple participating merchants.
The physical or digital format is separate from this distinction.
A gift card can be physical and closed-loop, digital and closed-loop, physical and open-loop, or digital and open-loop.
For more detail, see the article on open-loop vs closed-loop cards.
What Happens to the Gift Card Balance?
A gift card balance represents the amount of value still available for eligible purchases.
Suppose you have a $100 gift card.
You spend $30.
Your remaining balance may be $70.
You then spend another $20, leaving $50.
The exact balance-checking process depends on the issuer. You may be able to check it online, through an app, at a store, or through customer support.
Checking the balance before making a purchase can help prevent declined transactions.
Do Gift Cards Expire?
Some gift cards may have expiry dates or other conditions that affect how long the value can be used.
The rules depend on the issuer, card type, country, and applicable terms.
Some cards may also have conditions related to inactivity or fees.
For this reason, do not assume that every gift card follows the same expiry rules. Check the terms attached to the specific card.
The dedicated article on gift card expiry and fees covers this topic in more detail.
Can You Sell an Unwanted Gift Card?
Sometimes.
You may receive a gift card for a brand you do not use. In some cases, you can exchange the card through a gift-card trading service instead of leaving it unused.
The amount you receive may depend on factors such as:
- Gift-card brand
- Card type
- Region
- Currency
- Card balance
- Current exchange rate
- Verification requirements
The exchange value may be lower than the card's original face value.
For example, a $100 gift card does not necessarily mean you will receive the equivalent of $100 in Naira when you exchange it.
What Should You Check Before Using a Gift Card?
Before buying, using, or exchanging a gift card, check these points:
- Brand: Confirm who issued the card.
- Region: Check if the card is restricted to a particular country.
- Balance: Confirm how much value remains.
- Usage rules: Check where and how it can be redeemed.
- Expiry terms: Look for expiry or inactivity conditions.
- Exchange value: If selling the card, check the amount you will actually receive.
- Trading requirements: Confirm that an exchange service accepts your specific card type.
Summary
A gift card is prepaid value that can be used for eligible purchases under specific terms.
The basic process is simple: value is loaded onto the card, the recipient receives it, the card is used for an eligible purchase, and the amount spent is deducted from the balance.
The details depend on the card. Its format, acceptance model, purpose, region, expiry rules, and other conditions can affect how it works.
If you have a supported gift card that you do not need, Hara App provides a mobile option for exchanging eligible gift cards for Naira.
Have a supported gift card? Check the current gift-card exchange option on Hara App.
Frequently Asked Questions
1. What is a gift card?
A gift card is a prepaid payment method containing a specific amount of value that can be used according to the issuer's terms.
2. How does a gift card work?
A gift card is loaded with value and given to the recipient. When it is used for an eligible purchase, the amount spent is deducted from the available balance.
3. Can gift cards be used anywhere?
Not always. Some are restricted to one retailer or service, while others may be accepted by multiple participating merchants.
4. Can you use a gift card online?
Yes. Some gift cards can be used for online purchases, depending on the issuer and merchant.
5. Do all gift cards expire?
No. Expiry conditions vary by issuer, card type, country, and the card's terms.
6. Can a gift card be converted to cash?
Some gift cards can be exchanged through gift-card trading services. The available options and exchange value depend on the card and service.
7. Can I sell an unwanted gift card?
Yes, if the card is supported by a legitimate gift-card exchange service and meets its trading requirements.
