One of the top questions that we are asked on a daily basis is, “How do gift cards work?”

There are two types of gift cards; open loop and closed loop.  

A great example of an open loop gift card is a Visa® gift card that can be redeemed at any business that accepts credit cards.  Closed loop gift cards are set up to only be redeemed at one location or one chain that uses the same Point of Sale System.  At Plastic Printers.com, we only work with closed loop gift cards.  

What is a Point of Sale System?

A Point of Sale System (or POS) is a software used to track the current balance of the gift cards.  Many systems have additional functions such as the ability to run as a cash register, tracking membership and loyalty cards, etc.  There are thousands of POS systems available.

PlasticPrinters.com currently works with hundreds of POS companies and we continue to grow each day.  Your sales representative with PlasticPrinters.com will be able to tell you if we have worked with your specific provider in the past.  If we have not worked with them, we can certainly contact them to verify if we are able to produce cards within the system requirements.

What makes a closed loop gift card work?

Each gift card has been assigned a number (similar to an account number) which has been encoded on to the magnetic stripe as well as a number printed either directly above or directly below the magnetic stripe.  These printed numbers are called human readable numbers and they help in case the magnetic stripe ever malfunctions so that the cashier can manually enter the numbers..

How would the magnetic stripe malfunction?

One of the biggest reasons for magnetic strip failure is demagnetization.  This occurs when the card has been near magnets for a period of time.  Even though a magnet may be very powerful, it is the length of time of contact that will damage the magnetic stripe.  Cynthia Drake with CreditCards.com prepared a test using three different magnet types to attempt to deactivate a credit card (works very similar to a gift card).  

See her results here:

Now that you have an insight as to how they work, let's get started on yours!