Important things to know about selling gift cards

By MixDex Article may include affiliate links

As a business owner, there are a lot of rules and regulations that come with selling gift cards that you should be aware of.

In the United States, laws generally prohibit gift cards that customers pay for from expiring — and many states and regions have laws capping or banning fees on gift cards after a period of inactivity.

Note that these guidelines are general and may vary based on where you are based or where you sell — so always check with an account or lawyer for full details.

In addition, accounting practices and regulations also require that most businesses keep the total balance of gift cards listed as “liabilities” on the books until they are redeemed.

Put another way, businesses are technically supposed to keep the total amount of outstanding gift cards available for immediate withdrawal at all times — though you should always check with an accounting professional about issues like this.

Gift cards also generally cannot be listed as revenue until they are redeemed — a change from previous practices that let companies “boost” revenue in certain periods by encouraging gift card sales.

Many ecommerce solutions, including Shopify, take care of this on the backend by not paying out gift card sales until they are redeemed and by excluding them from sales reports until they are used.

In addition, in most cases unused gift cards must be tracked and eventually submitted to states as unclaimed property and the merchant doesn’t just get to keep the funds.

Note that gift cards issued as part of a promotion (such as a giveaway) can generally expire.

For example, if you give away $5 gift cards with a purchase or as part of a contest, the full $5 value can generally expire at any time you want. You’re also typically allowed to put restrictions on when the promotional value can be used (a common tactic is to offer BFCM deals that let customers spend bonus gift cards the following year).

Gift cards sold at a discount generally can have their promotional value expire — but the customer typically always must be able to spend the amount they paid. In other words, if you are offering a 20% off gift card sale and a customer buys and pays $80 for a $100 gift card, that extra $20 can expire, but the customer generally must always be able to spend the $80 they actually paid.