I was talking to a local ice cream parlor and asked them why they don’t do gift cards instead of gift certificates since gift cards sell a whole lot better.  This is the reason she gave and I quote.  “The biggest reason is because when I swipe a gift card to load money on it, the company in which we had the gift cards through automatically took that amount out of our bank account. We do not ever see that money until the gift card is redeemed, which for us can become an inconvenience since we run this gift card promotion in the holidays when business is slow. Every company does these kinds of promotions to increase their cash flow, but if they take it right out it accomplishes nothing.”

I responded to the merchant by telling her this makes no sense at all to me. I have never heard of a gift card company working this way. The job of the gift card company is to store all the data for you, that’s it. You would collect the money from the client using whatever payment method they want, such as cash, check or credit card. You then load that money onto the card per say, or simply tell the gift card company this card number has X amount of “pretend” money. When the customer uses the card, that amount is subtracted from the pretend balance with the gift card company.

In short, be sure your gift card company doesn’t work this way. After all these years, I have never heard of a gift card company doing this, but apparently there is at least one. Ask your credit card processing service provider who they work with and how they operate.