To offer promo cards or gift cards? That is the question.
Understanding the difference between the two can be a bit tricky. However, they are both effective at incentivizing repeat visit, improving customer engagement, strengthening loyalty and encouraging customers to spend more money with your business.
Let’s go over the differences between promo cards and gift cards and dive into how they can be used to best achieve your business goals.
Quick answer
If you need cash today, sell gift cards. If you need customers back in the door on a deadline, or a fast way to make a service issue right, give away promo cards. Most businesses that do this well eventually run both, just for different purposes.
What's the actual difference?
A gift card is something a customer buys. Whatever they load onto it is real, prepaid revenue, and it doesn't expire.
A promo card is something you give away. You preload it with a dollar amount and an expiration date, then hand it out for a contest, a seasonal promotion, to incentivize higher spends, or to make a service issue right. A customer can’t just come up and buy one.
Expiry dates
One of the main differences between gift cards and promo cards is the expiry date, or lack of one. In most of Canada, gift cards legally cannot expire and can't carry dormancy fees, so once a customer buys one, that value is theirs indefinitely. (Although an open loop gift card might carry some fees - so make sure you know your fine print. DataCandy offers closed loop gift cards to help you grow your brand).
A promo card is only valid during a specific window of time, and beyond that timeframe, it has no value.
This gives you complete control over a promo card's expiration date. For example, you can generate a promo card offering customers twenty percent off a purchase of seventy-five dollars or more between March 1 and 14, and once that window closes, so does the offer.
Cash flow
The big difference here is that gift cards are prepaid and promo cards are not. When a gift card is purchased, your business gets paid on the spot. Gift cards are a great moneymaker because they increase cash flow: you generate revenue in advance of providing any products or services. This can be especially helpful when you’re thinking about additional float to hold you over during the slower seasons.
Promo cards work the opposite way. Since they're given away rather than sold, there's no upfront payment attached to one at all. But they have potential to bring customers back and encourage higher spend.
Breakage and reporting
Since promo cards are never sold, breakage only applies to gift cards. If you're new to gift card programs, breakage refers to the balance left on a card that a customer never spends. Remember that gift card you never bothered to redeem because there was only $3.12 left on it? That's breakage, and it's more common, and more valuable, than most business owners realize. Industry estimates put breakage at somewhere between five and fifteen percent of total gift card sales, and in the US alone, unredeemed balances add up to over twenty billion dollars a year.
This is also why it matters that promo cards run as their own account type rather than getting mixed into your gift card program. If a giveaway or a service-recovery card started showing up in the same bucket as purchased gift cards, it would quietly skew your real breakage numbers and liability reporting. Keeping the two separate means the money you actually took in stays easy to track, and the cards you gave away don't get counted as something they're not.
Urgency
Promo cards carry a built-in deadline, and that timestamp creates urgency. Customers know that if they don't act, the offer disappears. That's why handing out promo cards is such an effective way to compensate for low foot traffic or seasonal slowdowns. Plenty of businesses hand out promo cards during the busy holiday season specifically to pull customers back in through January and February, historically slow months for a lot of retail and restaurant categories.
Gift cards don't create the same countdown-clock pressure, but they still work during slow periods, just on a longer timeline. A recipient holding a gift card knows they have money sitting there waiting to be spent, and most people don't stop at the balance. Consumers who redeem gift cards commonly spend more than the card's value, often by thirty to sixty dollars on top, depending on the category.
Customer acquisition
This is where gift cards pull ahead of promo cards. A promo card only means something to someone who's already a customer. A gift card, on the other hand, regularly ends up in the hands of someone who's never set foot in your business before.
More than half of consumers say a gift card would prompt them to try a business they otherwise wouldn't have, and that number has been climbing. After all, it’s free money and you don’t want to waste it. And for a business trying to grow its customer base rather than just re-engage the one it already has, selling gift cards does double duty: it's revenue today, and a new customer walking through the door on someone else's dime.
So, gift card or promo card?
This brings us back to our original question: gift card or promo card. Which is the right choice for your business? The right answer depends on your goals.
- If repeat business is the priority, use promo cards. They're a great motivator and work for a business of any size.
- If you need to boost cash flow right now, gift card sales and breakage are an excellent way to bring in revenue before you've delivered a single product or service.
- If you're trying to win back an unhappy customer, repair the relationship with a sincere apology and a promo card. It gives them a low-risk reason to give you another shot, without touching your actual gift card stock.
- If you're trying to grow your customer base, selling gift cards is one of the best ways to introduce your business to people who've never bought from you. Gift cards are one of the most requested gift items.
- If you're trying to deepen engagement with existing customers, pair a happy birthday message with a promo card. It's an easy, low-cost way to stay top of mind with people who already love you.
Because promo cards and gift cards offer specific yet equally important benefits, the best strategy is to offer both!
FAQs
What is a promo card? A gift card preloaded with a dollar amount and a set expiration date. Businesses give them away for contests, promotions, or to resolve customer service issues, they can't be sold.
Can customers buy promo cards? No. Promo cards can only be given away. If you want a card customers can purchase, that's a standard reloadable gift card.
Do promo cards expire? Yes. You set the expiration date when you create them, unlike regular gift cards, which don't expire.
Do promo cards affect my gift card reporting? No. They run as a separate account type, so giveaways don't mix into your real purchased gift card balances or breakage numbers.
Can I use a promo card to fix a customer service issue? Yes, it's one of the most common uses, issuing a preloaded card as a service recovery without touching your regular gift card stock.