How Do Gift Cards Work? Balances, Payments, and Delivery

A gift card gives its holder a prepaid balance to spend under the issuer’s rules. A unique card number or code identifies that balance. When an eligible purchase completes, the system deducts the amount used and records what remains. A digital gift card uses a delivered code instead of requiring a physical card.

For an online store, there are two separate purchases to understand. First, someone buys the gift card. Later, its holder uses the balance to buy products. Sending the code, accepting it in a cart, and completing that later order are separate events too.

This guide explains those distinctions for shoppers and merchants. Runner AI publishes it; the Runner example describes checked-in source and test scenarios, not a live transaction performed for this article.

Store gift cards and network gift cards work differently

A closed-loop gift card works with a particular merchant or group of participating businesses. An open-loop gift card uses a payment network and has broader acceptance, subject to the issuer’s restrictions. The FDIC’s gift card guide explains the difference between merchant cards and bank-issued network cards.

That distinction changes where you enter the details. A store’s gift code may belong in a dedicated gift-card field. A network gift card may use the checkout’s card-payment form. Follow the issuer’s instructions rather than assuming the two are interchangeable.

Physical and digital describe the delivery format, not the acceptance rules. An emailed code is not automatically usable at every online store. Before buying, check the merchant, currency, eligible products, and whether the card works online, in person, or both.

What happens from purchase to redemption?

The usual sequence has four parts:

Purchase or issue. A buyer pays for a chosen value, or the merchant issues a card under its own program. A merchant-issued card is not proof that a customer payment occurred.
Activate and deliver. The issuer makes the balance available and provides the card or code. Some programs require an additional claim or activation step.
Apply at checkout. The system checks whether the card is valid, has a balance, and can cover this purchase.
Complete and update. The order uses the permitted amount, and the card’s remaining balance is updated.

CARDSource’s explanation describes the connection between a unique number and a balance held in a gift-card or point-of-sale system. The value is not simply a number printed on plastic. That is why copying a code does not create another funded card.

For digital delivery, BHN Rewards describes an email-and-code flow. Its particular claim and activation steps are not universal. A merchant should state who receives the email and what that person must do next, rather than promising that every gift card is instantly ready to spend.

A worked example of a remaining balance

Suppose a shopper has a $50 store gift card. These numbers are illustrative, not customer results. Assume every purchase is eligible and the program supports partial redemption and a second payment method.

Activation. The buyer pays $50 for the card. Its available balance is $50.
First order totals $30. The gift card covers $30, with no other payment. Its remaining balance is $20.
Second order totals $35. The gift card covers $20, and another payment method covers $15. Its remaining balance is $0.

The first order does not use up the card merely because the code was entered once. The second order does not get a $35 discount. It uses the remaining $20 of prepaid value, leaving $15 to pay another way.

Check the final total, including applicable shipping and tax, rather than only the product price. Whether a particular card covers those charges depends on the program. If split payment is unsupported, the shopper may need a different checkout arrangement; do not assume every issuer handles the example above.

For a merchant, keep the gift-card purchase and later redemption distinguishable in reports. Do not add both cash receipts as though the same money arrived twice. Ask your accountant how to record issued balances, redemption, refunds, and unused value under the rules that apply to your business. A sales dashboard is not an accounting policy.

What Runner’s implementation makes explicit

Runner’s store-backend source illustrates why delivery and spending need separate checks. The paid-order issuance function, deliverOrderGiftCards, checks payment before creating purchased cards. It creates missing cards for gift-card line quantities and sends unsent codes to the order’s email address. It does not infer a separate gift recipient.

The function also records issuance and email results separately. A card can exist while its email is skipped or fails. If a buyer says no code arrived, creating another funded card immediately could duplicate the value. Check the original order and delivery outcome first.

The backend checkout test suite defines concrete scenarios for:

A gift card covering the full order, with no additional card charge.
A $25 gift card on a $60 order, leaving $35 for the card payment.
A declined remainder payment restoring the gift card’s balance.
Two carts attempting to spend one balance at the same time, with only one succeeding.
A canceled order restoring the amount spent once, even if restoration is requested again.

These are source-level contracts, not a claim that this article reran the backend suite or verified every deployed storefront. The implementation also refuses gift-card credit on carts containing dropshipped supplier items. Do not advertise a card as covering the entire catalog without checking the actual product restrictions.

For Runner’s supported management entry points and prerequisites, use the Store Operations Plugins guide. It owns the setup instructions. Enabling a backend feature does not by itself prove that a particular published storefront accepts its codes correctly.

What merchants should check before selling gift cards

Test the whole journey with an authorized test purchase, not just the product page. Record the expected balances before starting.

Delivery. Confirm the destination email, code, value, and currency. Check what support can see when delivery fails.
Partial use. Spend less than the balance and confirm the remainder is available on another order.
Split payment. Spend more than the balance and confirm the other payment method charges only the remainder.
Failed checkout. Verify that a declined payment does not leave value missing without a completed order.
Cancellation. Confirm which amount returns to the gift card and which returns through another payment method. Test the program’s actual rules, not an assumed cash refund.
Restrictions. Check excluded products, currencies, expiry terms, and any rules on buying another gift card.

Write those terms where a buyer can find them before payment. Keep support instructions specific enough to distinguish a missing email from an invalid code or an exhausted balance. Our order-level refund guide explains why payment adjustments and order status also need separate checks.

How do e-gift cards work?

They provide a digital code or account-linked value instead of requiring a physical card. The recipient follows the issuer’s delivery and activation instructions, then redeems the value at an eligible checkout. An email arriving is evidence of delivery, not proof that a later order spent the balance.

Can I use a gift card more than once?

Often, yes, when the program retains unused value. Check the current balance and terms. A one-use promotional voucher is not necessarily a stored-value gift card, even if its design looks similar.

Is a gift card the same as a discount code?

No. A gift card provides value to spend; a discount changes the price under an offer’s conditions. A $20 gift-card redemption and a $20 discount can produce the same amount due on one order, but they mean different things for balances and records.

Do gift cards expire, and can I exchange them for cash?

Do not assume a universal answer. Terms and legal requirements vary by card and jurisdiction. The FDIC explains US federal protections for covered gift cards and notes that state laws can add protection. Check applicable rules before setting expiry or cash-redemption terms; this guide is not legal advice.

Treat the code as spendable value. Share it only with the intended recipient or through the issuer’s legitimate redemption process. The FDIC warns about scammers demanding gift-card numbers and PINs. Keep purchase records, and contact the issuer promptly if the code is exposed or stolen.

Source notes

The Runner example is based on the store backend’s deliverOrderGiftCards function in issuance.ts and the scenarios in gift-cards-checkout.spec.ts. These explain issuance, delivery outcomes, and balance handling. For the shopper-facing promise, verify your own store’s supported checkout and published terms before offering the card.