Selling Digital Gift Cards on Your Online Store: Setup and Rules

On this page 7 sections

1. How to Sell Digital Gift Cards on Your Online Store
2. Why eGift Cards Are a Top Target for Stolen Cards
3. Fraud Controls to Stop eGift Card Fraud: Delivery Delays, Limits, and Review Rules
4. Federal and State Gift Card Expiration Rules and Fees
5. State Gift Card Escheat Laws for Unredeemed Balances
6. Accounting for Gift Card Sales as Liabilities
7. Next Steps

Key takeaways

• Choose between your platform's built-in gift cards and a third-party app based on redemption channels, fraud controls and reporting.
• eGift cards attract stolen-card fraud, so set up delivery delays, purchase limits and manual review rules before launch.
• Federal and state laws restrict gift card expiration dates and fees, and state unclaimed-property laws may cover unredeemed balances. Confirm your obligations with an attorney.
• Track gift card sales separately from revenue until redemption, and keep records detailed enough to support escheat reporting.

Digital gift cards are easy to add to a store and easy to sell, especially in the weeks before a holiday. When you sell digital gift cards on your online store, you take on three responsibilities that a typical product sale doesn't carry: fraud risk, federal and state consumer rules, and a liability on your books. This guide explains how to set up emailed gift cards, how to stop fraudsters from turning stolen cards into eGift codes, and how to handle expiration rules, unclaimed balances and accounting.

This article is general information, not legal, tax or accounting advice. Gift card law varies by state and changes over time. Confirm your obligations with a qualified attorney or CPA.

How to Sell Digital Gift Cards on Your Online Store

Most ecommerce stores sell eGift cards in one of two ways. Some use the gift card feature built into their platform. Others install a third-party ecommerce gift card app. Either can work. The right choice depends on where customers will redeem the cards and how much control you need over fraud and reporting.

Native Platform Gift Cards vs. an Ecommerce Gift Card App

Platforms handle gift cards differently. Some include the feature only on certain plans, some include it as standard, and some rely on extensions or add-ons. Check your platform's current plan features before you commit. If you're on Shopify, WooCommerce or BigCommerce, also confirm that your payment setup works with the gift card tool you choose.

If you also sell in person, confirm that cards sold online can be redeemed at your counter and that both systems share one balance record. Split balance records create customer service problems and make unclaimed-property reporting harder.

Setup Checklist

1. Decide your denominations. Fixed amounts are easier to monitor than open custom amounts. If you allow custom values, set a ceiling.
2. Write your terms. State who issues the card, any fees, any expiration and how to check a balance. Show the terms before purchase and include them in the delivery email.
3. Configure delivery. Let the buyer choose a recipient email and send date. Don't release codes the moment payment authorizes (more on that below).
4. Block gift-card-for-gift-card purchases. Don't let customers pay for a new gift card with an existing one. Shuffling balances this way can help launder stolen value.
5. Set your refund policy. As a general practice, refund a gift card purchase to the original payment method, not as cash or as store credit issued to someone else.
6. Tell your processor. Adding stored-value products changes your sales mix. Read when to tell your payment processor about business changes before you launch.

Why eGift Cards Are a Top Target for Stolen Cards

To a fraudster, an eGift card is close to cash. It arrives instantly, needs no shipping address and can be resold on secondary markets or spent quickly. Physical goods have to ship somewhere, which leaves a trail and gives you time to spot a problem. A digital code can be redeemed or sold within minutes of purchase.

The usual pattern looks like this:

• A fraudster uses stolen card details, or a hijacked customer account, to buy one or more eGift cards.
• The codes go to an email address the fraudster controls, often one that looks unrelated to the cardholder.
• The codes are redeemed for merchandise or sold to someone else at a discount.
• Weeks later, the real cardholder disputes the charge. You lose the sale amount, any merchandise already redeemed against the code and a chargeback fee.

Gift card fraud also includes balance-checking attacks, where bots guess codes against your balance lookup page, and card testing, where small gift card purchases are used to check whether stolen cards still work.

Fraud Controls to Stop eGift Card Fraud: Delivery Delays, Limits, and Review Rules

Good controls slow fraudsters down without frustrating real gift buyers. These are the levers most stores can use.

Delivery Delays

A short hold between payment and code delivery gives your fraud tools, and sometimes the cardholder's bank, time to flag a problem. For example (illustrative), you might hold first-time buyers' cards for a review window and deliver repeat customers' cards immediately. Say so clearly at checkout ("eGift cards are delivered within X hours") so buyers aren't surprised.

Purchase Limits

• Cap the number of gift cards and the total value per order.
• Cap purchases per account, per payment card, per device and per IP address over a set period.
• Treat unusual quantities of your highest denomination as a review trigger, not an automatic approval.

Review Rules

Flag orders for manual review when several of these signals appear together:

Many processors and gateways let you build rules like these. Our guide to Stripe Radar rules for small stores shows the kind of logic that translates to most fraud tools. Don't overcorrect, though. Blocking too aggressively turns away real buyers, a problem covered in why good customers' cards fail at your checkout.

Authentication and Code Security

• Use 3-D Secure on higher-risk gift card orders. When authentication succeeds, liability for certain fraud chargebacks may shift to the card issuer, depending on card network rules. See 3D Secure for online stores for how to apply it selectively, and MannyPay's 3-D Secure authentication options.
• Use long, random codes, ideally paired with a separate PIN.
• Rate-limit your balance lookup page and add bot protection to it.
• Watch for account takeover. Require re-authentication before saved cards can be used to buy gift cards.

Federal and State Gift Card Expiration Rules and Fees

Both federal and state laws restrict how gift cards can expire and what fees you can charge on them. These rules can affect expiration dates, dormancy or inactivity fees, service fees and what you must disclose to buyers. They can also treat paid gift cards differently from promotional or loyalty cards.

State gift card expiration rules can be stricter than federal rules, including rules on fees and on cashing out small remaining balances. Because you sell online, customers in many states can buy your cards. Ask your attorney which states' rules may apply to your program, not just your home state's.

Before you launch, work through these questions with your attorney:

• Can your cards carry an expiration date at all, and if so, what's the earliest date allowed?
• Are any dormancy, inactivity or service fees permitted, and under what conditions?
• What must your terms disclose, and where (checkout page, delivery email, the card itself)?
• Must you refund small leftover balances in cash if a customer asks?
• Do promotional cards follow different rules than cards customers pay for?

Many merchants choose terms with no expiration and no fees, which keeps disclosures simple. Even then, write your terms down and display them consistently.

A practical point on promotional cards: If you give away a bonus card (for example, "buy $100, get a $20 bonus card," illustrative), keep it separate from paid gift cards. Label it clearly as promotional, with its own terms. Mixing paid and promotional value on one code makes both compliance and accounting harder.

State Gift Card Escheat Laws for Unredeemed Balances

Escheat, or unclaimed property, laws require businesses to report and sometimes turn over property that has gone unclaimed for a set dormancy period. Gift card balances can fall under these laws, but treatment varies widely by state. States differ on whether gift cards are covered at all, how long the dormancy period runs and how much of an unredeemed balance must be reported or remitted.

Which state's rules apply can depend on the owner information you hold and where your business is organized. That affects how you design your program: whether you collect and keep buyer or recipient addresses may change which state can claim a balance. Make this decision with an unclaimed-property professional, not by default in your app settings.

To stay ready for reporting:

• Keep a record of every card's issue date, value, transactions and last activity.
• Keep any owner information you collect, tied to each card.
• Ask your advisor which states you may need to file in and when, then put those deadlines on your calendar.
• Don't write off old balances as income without checking your escheat obligations first.

Accounting for Gift Card Sales as Liabilities

When a customer buys a gift card, you haven't earned that money yet. You owe goods or services in the future. Businesses generally treat gift card sales as a liability, often called deferred revenue, and recognize revenue as cards are redeemed. Confirm the right treatment for your business with your CPA.

A simplified, illustrative example:

1. A customer buys a $50 eGift card. Record $50 in cash and $50 as a gift card liability.
2. The recipient later spends $30. Move $30 from the liability to revenue.
3. The remaining $20 stays a liability until it's redeemed, reported under escheat law or handled under whatever policy your CPA sets for breakage, meaning value you expect will never be redeemed.

Breakage and escheat are connected. If a state may claim unredeemed balances, you may not be able to count them as your own income, so have your CPA and your unclaimed-property advisor look at them together. Ask your CPA how sales tax applies to gift card sales and redemptions in the states where you sell.

Your payment records matter here too. Gift card purchases show up in your processing reports like any other sale, so your accounting system needs to separate them from merchandise sales. If you use QuickBooks, ask your accountant about setting up a dedicated gift card liability account rather than booking these sales as income.

Next Steps

Before you launch or expand eGift cards:

1. Choose a native or app-based program that matches your redemption channels.
2. Turn on delivery delays, limits and review rules before your first busy season.
3. Write clear terms, and have an attorney check them against federal and state expiration and fee rules.
4. Set up record-keeping that supports both liability accounting and escheat reporting.
5. If you expect a holiday surge in gift card orders, warn your processor before a sales spike.

MannyPay provides online payment processing for ecommerce stores, with gateway and platform integrations and 3-D Secure support. If you're reviewing your setup for a low-risk ecommerce business, request a free quote. A MannyPay specialist responds within one business day.

ME

About the author

MannyPay Editorial Team

Beyond the Swipe's editorial desk researches the publication's guides and news and cites its sources in every article. Articles reviewed by a named MannyPay editor carry that editor's byline.

This article is for general educational purposes and is not legal, tax or financial advice. Card network rules and state laws change; confirm current requirements for your business.