Gift Card Discount
A Gift Card Discount is a promotional strategy where a store sells a gift card for less than its face value—for example, selling a $50 gift card for $40. The recipient still receives the full $50 balance, but the purchaser pays a reduced price. This tactic is used to drive gift card sales, acquire new customers, and boost cash flow.
Types of gift card discounts
- Direct price discount: The card is sold below face value (e.g., pay $45 for a $50 card).
- Bonus value: The buyer pays full price but the card is loaded with extra value (e.g., pay $50, get a $60 card). This feels like a deal without discounting the price.
- Bundle promotions: Buy a gift card and receive a bonus card (e.g., “buy a $100 card, get a free $15 card for yourself”).
- Volume/bulk discounts: Discounts for corporate buyers purchasing in large quantities.
Strategic benefits
Discounted gift cards create a win-win dynamic. The buyer feels they’re getting a deal. The recipient gets full value. And the store benefits from upfront cash, increased foot traffic when the card is redeemed, and the likelihood that the recipient will spend more than the card’s value (known as uplift). Seasonal promotions—like Black Friday or holiday gift card deals—can significantly boost sales.
Accounting considerations
When a gift card is sold at a discount, the liability recorded should reflect the face value of the card (the amount the store is obligated to honor), not the discounted purchase price. The difference between the sale price and the face value is a promotional expense. Consult an accountant to ensure proper treatment under your applicable accounting standards.