What Is a Gift Card
A gift card is a physical card assigned a unique identifier that allows a POS system to track and manage stored value.
The card itself does not hold money. Instead, it references value stored within the POS or related system.
Understanding the Card as a Reference Key
Think of a gift card as a key to a locker. The card contains a unique number or code, but the actual value is stored in a secure database. When the card is scanned or swiped, the POS system uses that identifier to look up the associated balance and transaction history.
How Gift Cards Are Sold
When a gift card is sold, the POS system activates the card and associates a monetary value with its unique identifier. This process is called loading or activation.
Step-by-Step: Selling a Gift Card
The card is scanned or swiped at checkout
The cashier uses a barcode scanner or magnetic stripe reader to input the card's unique identifier into the POS system.
A value is assigned through the POS system
The cashier enters the amount the customer wants to load onto the card. This can be a fixed amount or a custom amount depending on the POS configuration.
The customer pays for the card
The customer completes the purchase by paying the loaded amount plus any applicable fees.
The value is stored in the system under that card's identifier
The POS system records the card number and its balance in a database. The card is now active and ready for use.
The physical card acts as a key that allows the POS system to retrieve the stored value later. Without proper activation, the card remains inactive and cannot be used for purchases.
How Gift Cards Are Redeemed
When a customer uses a gift card to make a purchase, the POS system retrieves the stored balance and applies it to the transaction. This process is called redemption.
Step-by-Step: Redeeming a Gift Card
The card is scanned or swiped
The cashier or customer scans the barcode or swipes the magnetic stripe to input the card identifier.
The POS system identifies the card
The system looks up the card number in its database and retrieves the current balance.
The stored value is applied to the purchase
The available balance is deducted from the transaction total. If the balance is insufficient, the customer can pay the remaining amount with another payment method.
The remaining balance is updated in the system
After the transaction is complete, the POS system updates the card's balance in the database. The customer can continue using the card until the balance reaches zero.
When Redemption Fails
If the card format or number structure does not match what the POS expects, redemption may fail. Common causes include incorrect barcode symbology, wrong number length, or incompatible encoding on magnetic stripe cards. These issues prevent the POS from recognizing the card as valid.
Barcode vs Magnetic Stripe Gift Cards
Gift cards typically use one of two formats for storing and reading the unique identifier. The format determines how the card is processed at checkout.
Barcode Gift Cards
Barcode gift cards use printed barcodes that are scanned at checkout. The barcode contains the card's unique identifier encoded in a format that can be read by standard barcode scanners.
Works with standard barcode scanners
No physical contact required
Lower cost per card
Compatible with most modern POS systems
Magnetic Stripe Gift Cards
Magnetic stripe gift cards use encoded data stored on a magnetic strip that is read by swipe readers. The stripe contains the card identifier encoded in a specific track format.
Familiar card experience similar to credit cards
Durable magnetic encoding
Required by some POS systems
Works with card swipe readers
Choosing the Right Format
The correct format depends entirely on what your POS system requires. Some systems only accept barcode cards, others only accept magnetic stripe cards, and some accept both.
Ordering the wrong format creates operational problems at checkout. Verification before printing prevents this issue.
How POS Systems Handle Gift Cards
Point-of-sale systems manage gift cards through integrated software that tracks card identifiers, balances, and transaction history. Understanding this process helps explain why technical compatibility matters.
Core POS Gift Card Functions
Recognizing Card Identifiers
When a card is scanned or swiped, the POS reads the identifier and determines whether it matches expected formatting rules. If the format is incorrect, the system may reject the card or fail to process it.
Storing Value in a Database
The POS maintains a database linking each card identifier to its current balance. This database may be stored locally on the POS hardware, in the cloud, or on a dedicated server depending on the system architecture.
Applying Balances During Transactions
During checkout, the POS retrieves the card balance from the database and applies it to the transaction total. The system then updates the balance and records the transaction for future reference and reporting.
Why POS Systems Handle Gift Cards Differently
Each POS system handles gift cards differently based on manufacturer design decisions, software configuration, and integration with payment processors.
Some systems require specific barcode symbologies like Code 128, while others accept multiple formats. Some require exact number lengths, while others are flexible. These differences make compatibility verification essential.
Why Formatting and Compatibility Matter
Gift card failures at checkout are often caused by formatting or compatibility issues rather than hardware malfunctions. Understanding these common problems helps businesses avoid operational disruptions.
Incorrect Barcode Formats
Using the wrong barcode symbology prevents scanners from reading the card correctly. For example, if a POS requires Code 128 but cards are printed with Code 39, the scanner may not recognize the barcode or may read incorrect data.
Number Lengths Do Not Match POS Expectations
Many POS systems require card numbers to be a specific length. If the number is too short or too long, the system may reject it during activation or redemption. Common required lengths include 13, 16, or 19 digits, but requirements vary by system.
Scanner or Reader Incompatibility
Some barcode scanners only support certain symbologies or have resolution limitations. Magnetic stripe readers may only read specific track formats. Hardware limitations can prevent cards from being read even when formatting is technically correct.
When Issues Appear
These issues often appear at checkout when customers attempt to use their cards. By that point, the cards are already printed and distributed, making corrections expensive and time-consuming.
Testing and verification before production prevents these problems from reaching customers.
Why Businesses Verify Compatibility Before Printing
Verifying compatibility before printing helps reduce operational risk and ensures gift cards work correctly when customers attempt to use them.
Benefits of Pre-Production Verification
Prevents Checkout Failures
Testing cards with actual POS hardware before full production ensures they scan and process correctly at checkout.
Reduces Customer Frustration
Non-functional gift cards create negative customer experiences. Verification prevents customers from receiving cards that do not work.
Avoids Operational Disruptions
Discovering compatibility issues after distribution requires reprinting cards, notifying customers, and managing returns. Pre-production testing avoids these disruptions.
Protects Business Reputation
Businesses that distribute non-functional gift cards risk damaging their reputation. Verification ensures quality before cards reach customers.
How Scan-Cards Verifies Compatibility
Scan-Cards reviews POS compatibility before production begins. This process includes confirming the required card format, barcode symbology, number structure, and encoding specifications.
For businesses with uncommon or custom POS configurations, test cards can be produced and shipped for physical testing before full production.
Learn about the POS verification processIndustry Standards and Resources
Gift cards use standardized technologies for card dimensions, barcode formats, and magnetic stripe encoding to ensure compatibility with standard POS equipment and card readers.
Consumer Protection and Regulations
Gift cards are subject to federal consumer protection regulations that govern expiration dates, fees, and disclosure requirements. These rules protect consumers and establish standards for how businesses manage gift card programs.
Who This Guide Is For
This guide provides foundational knowledge for business owners and managers who need to understand how gift cards function operationally.
Businesses Considering Gift Cards
Business owners evaluating whether to offer gift cards and what format to use.
Businesses Switching POS Systems
Businesses transitioning to new POS hardware or software who need to understand compatibility requirements.
First-Time Gift Card Orders
Businesses ordering gift cards for the first time who need clarity on how the process works.