Gift cards are evolving into an entire class of payment. This will help change how consumers not only purchase goods and services but even how they handle what is, in essence, a form of money that is more closely tied to actual purchasing and, so, can provide retailers and brands a new and even evolving class of opportunities.
Business services firm PwC is among those that have pointed out that how consumers pay for purchases is changing and that gift cards have become a more critical part of the mix. In its 2025 holiday outlook, the company reported that 27% of consumers selected gift and prepaid cards as a preferred payment method, up 14% year over year.
In a study released earlier this year, TSG, a payments consulting and analytics firm, and Bank of America reported that gift cards continue to gain popularity, with 81% of consumers purchasing one over the past year, a six-point increase from the year before.
The holidays demonstrate how integral gift cards have become to consumer shopping habits. For example, the National Retail Federation, in a survey it conducted for its Thanksgiving weekend spending forecast, found that 43% of consumers were intent on purchasing gift cards. The figure ranked gift cards second among categories consumers expected to shop for during the period, just behind apparel and accessories (cited by 50%) and ahead of toys (cited by 32%). NRF anticipated total gift card spending in the period to reach $29.1 billion, up from $28.6 billion in 2024, with consumers purchasing between three to four gift cards and shelling out an average of $171.32 per person.
Restaurants remain the most popular gift card type, at 27%, followed by bank-issued cards (25%), department store cards (25%) and coffee shop cards (20%). It’s worth noting that retailers offering gift cards for services such as restaurant meals and travel are tapping into sectors that would otherwise provide no benefit to them. They not only gain from commissions but also from ancillary purchases, such as greeting cards. They can also pick up secondary sales from those stopping by to purchase the cards.
Happy Holidays
Part of what is driving gift card sales is their popularity among recipients. In a broader NRF survey conducted with Prosper Insights & Analytics, consumers said they looked forward to receiving the most during the holidays: gift cards, the first choice of half of the respondents. The popularity of gift cards exceeded that of clothing or accessories (46%), books and other media (27%), personal care or beauty items (23%), and electronics (22%).
“From a promotional standpoint, (gift cards) have become a marquee tool in holiday marketing,” said Scott Benedict, founder and CEO of consultancy Benedict Enterprises. “Target is one of the best examples — leveraging gift card bonuses such as ‘buy $100, get $20’ — to drive traffic, build baskets and pull forward demand. Because gift cards don’t create the same margin pressure as traditional discounting, they allow retailers to promote aggressively while protecting profitability. Costco and Sam’s Club both offer gift card bundles that provide their members more than the face value of the card as a benefit.”
Examples include paying $85 for a $100 gift card at a high-end restaurant chain. In such cases, retailers can tap into revenue that would otherwise be inaccessible.
As for Target, the company prominently incorporated gift cards into its seasonal promotional schedule, tying them to its loyalty program. From December 6 to 7, the retailer offered its Target Circle loyalty program members 10% off Target gift cards. In a similar promotion a year previously, Target said it had sold more than six million of its gift cards.
From a promotional standpoint, gift cards have become a marquee tool in holiday marketing.
– Scott Benedict, Founder & CEO, Benedict Enterprises
Gift cards have become more prevalent in retail promotions. Dollar General included discounts on popular brand gift cards among its holiday Jolly Good Deals. Gift cards appear in various places and at certain times of the year. For example, this summer, as part of its 40th-anniversary U.S. celebrations, Ikea promotions included a sweepstakes for its consumer loyalty and Business Network members, offering gift cards valued at up to $500 as prizes. Burlington Stores offered $250 gift cards as part of a sweepstakes celebrating its brand refresh.
Costco, in its fiscal July financial report, identified gift cards as a top seller in the non-food category, as the back-to-school and back-to-college season is in full swing. The International Housewares Association’s 2026 Occasions study identifies gift cards as a top off-to-college gift, which may explain part of their success. In the Occasions study, 47% of consumers said they would purchase a gift card for the leaving-for-college juncture, versus 30% who would buy a specific gift. Across all occasions covered by the study, a substantial proportion of consumers preferred gift cards, though the preference was stronger for some occasions than others. During retirement, gift cards were also popular, with 39% choosing them, compared with 31% who preferred a specific gift.
The Evolution
Scott Benedict, founder and CEO of consultancy Benedict Enterprises, said gift cards have become not only more popular but also more diverse, as they are used for more occasions and in more ways.
“Gift card growth has remained consistently strong since 2020, with digital formats leading the way,” he said. “Retailers have leaned into gift cards as a hedge against demand volatility, and shoppers appreciate the combination of convenience, immediacy and choice. Consumer intent to purchase gift cards continues to rise. With the holiday season becoming increasingly elongated, gift cards also serve as a safe fallback when shoppers feel uncertain about inventory availability, delivery timing or what recipients want. I expect gift card sales this holiday season to reach another high-water mark, fueled by omnichannel fulfillment, loyalty tie-ins, and customers managing tight budgets.”
Brett Narlinger, chief revenue officer for gift card and payments operator Blackhawk Network (BHN), said that even with the economic pressure many consumers face from factors such as inflation, they didn’t waver from plans to celebrate the holiday season. Although 13% of survey respondents said they plan to buy fewer gifts, he maintained that overall holiday gift spending continues to rise. Overall, macroeconomic factors will influence how people buy and use gift cards, and they may even encourage purchases.
“If pricing trends upward, particularly for physical goods, consumers may rely even more heavily on gift cards to optimize value,” Narlinger said. “Shoppers won’t let economic challenges diminish their holiday spirit. They’re shopping smarter and leveraging every tool at their disposal — from AI to cashback apps — to make their budgets work harder. Gift cards have become central to this strategy, offering a way to give generously while maintaining financial control.”
Shoppers won’t let economic challenges diminish their holiday spirit. They’re shopping smarter and leveraging every tool at their disposal — from AI to cashback apps — to make their budgets work harder. Gift cards have become central to this strategy, offering a way to give generously while maintaining financial control.
– Brett Narlinger, Chief Revenue Officer, Blackhawk Network
According to BHN research, many consumers today regard gift cards as a flexible means to manage money across a variety of use cases despite the unsettled economy and general spending caution. To make the most of their budgets this holiday season, consumers began shopping earlier to have more time to seek bargains and check out promotions as they rolled out, while also leveraging loyalty points, coupons, and technology. And they planned on including gift cards in their seasonal strategies, Narlinger said, with BHN research indicating “gift cards will represent 39% of total holiday budgets, a 12% increase over last year. Gift cards are particularly attractive for several reasons: they ease financial stress for recipients, and they offer choice and flexibility.”
Consumers concerned about rising prices amid the current economy are buying gift cards to better manage their holiday budgets, Narlinger noted.
“Overall, gift cards remain one of the most resilient and strategically valuable tools in a retailer’s playbook, especially during uncertain economic conditions and fast-paced holiday cycles,” Benedict added.
Over time, gift cards, once a peripheral consideration for giving occasions, have become an important factor for consumers and retailers.
“Gift cards have evolved from a simple convenience item into a strategic revenue engine for retailers,” Benedict said. “What started as paper certificates and plastic cards has become a highly sophisticated category powered by digital fulfillment, mobile wallets and omnichannel distribution. Today, gift cards function as both a financial instrument and a customer-acquisition tool, giving retailers a unique blend of immediate cash flow and future traffic.”
The evolution of gift cards has occurred in step with changes in retail technology.
“Digital gift card sales in particular have accelerated post-COVID as consumers became more comfortable gifting through text, email and retailer apps,” Benedict pointed out. “This has effectively removed the time crunch barrier and made gift cards part of last-minute gifting behavior.”
Indeed, gift cards have co-evolved with retail as digitization and personalization have become bigger factors.
“Consumers increasingly expect instant delivery, custom designs and mobile wallet storage. Retailers are responding with more flexible digital gifting flows,” Benedict said.
At the same time, gift cards have become a driver of loyalty program growth.
“Gift cards now often tie into loyalty rewards, enabling retailers to capture shopper identity at both purchase and redemption,” Benedict pointed out.
BHN research shows younger consumers are participating in loyalty programs more frequently than in past years, and many are redeeming loyalty points for gift cards. Then, consumers have added their own dynamics to those driven by retailers.
“Gift cards are now widely used for self-consumption, budgeting, and category-specific buying, for example, gaming, food and beverage, streaming. This broadens the category beyond seasonal gifting,” Benedict said.
The Economy
Although not always considered in the broader context, gift card activity and opportunities are tied to developments in the broader economy. A study by the Mastercard Economics Institute (MEI) found that when prices rise, shoppers are more likely to consider using gift cards. At a time when inflation remains a concern, gift cards offer consumers a way to manage rising prices by giving recipients choices. They can use gift cards to buy designated items, or they can compile gift cards to purchase something they might not otherwise be able to afford. Online exchanges, where consumers can sell their gift cards for a percentage of their face value, allow recipients to consolidate the value of disparate vouchers for large purchases or, in some cases, even everyday necessities. Gift cards also give recipients the option to wait for promotions or seek lower-priced alternatives to what they might want. For givers, purchasing a gift card for a desired amount relieves the stress of shopping for the best price and the worry that it will be more expensive by the time they get around to shopping. Although the work to secure the best price is passed on to the recipient, the choices provided, as detailed, can more than compensate.
MEI forecasts higher-than-normal gift card purchasing in the 2025 holiday season, with almost a third of the spend occurring in December and January. In that case, gift cards drive late-season holiday spending, with fiscal benefits spilling over from one year to the next. Some product categories experience a stronger link between time of year and gift card spending. For instance, 38% of all gift card spending at toy stores happens during December and January. The proportion is 37% for bookstores and 36% for the health/beauty/medical supply store channel.
MEI forecasts higher-than-normal gift card purchasing in the 2025 holiday season, with almost a third of the spend occurring in December and January. In that case, gift cards drive late-season holiday spending, with fiscal benefits spilling over from one year to the next
In 2025, Narlinger said, more than three in four shoppers “will buy gift cards in-store. However, online shopping is growing: 63% of younger shoppers will buy gift cards online this year, up from 57% last year. And 54% of older shoppers will buy gift cards online this year, a 14-point jump over last season.”
BHN research indicated digital gifting has seen significant year-over-year growth, particularly through messaging and social media apps, with one-third of younger consumers having already purchased gift cards via messaging platforms and almost 60% expressing interest in doing so. The development can provide retailers and other businesses with a critical chance to engage consumers digitally.
Youth Movement
Narlinger stated that younger consumers are exerting a unique influence on gift card trends. However, trends in gift card use can be traced to several demographic factors.
“Gen Z and Millennial shoppers are driving the most tech-forward trends,” Narlinger said. “Top preferred gift card categories among Gen Z and women are beauty and pampering products, while, for men, it is video games, and for Boomers, it is dining and restaurants. Younger generations are twice as likely to purchase gift cards for clothing and groceries, and three times more likely for toys, electronics, appliances, furniture and/or automotive. Consumer preference for multi-brand gift cards also continues to grow.”
From mid-2024 to mid-2025, four of five consumers purchased gift cards, with Gen Xers and Millennials leading, according to BHN research. The gift card shopper is typically male, married or in a relationship with kids at home and living in an urban environment, the BHN research found, which provides some targeted promotional opportunities.
Holidays account for a large share of gift card sales, and birthdays follow the year-end festive season as the second most common occasion for card giving, with “thank yous” and life events also generating a significant share of purchases. The top five retail sectors tapped for gift card purchasing are mass merchants, grocery stores, restaurants, dollar stores and beauty stores.
As he observed during his tenure as a buyer at a major retailer, Benedict said that gift cards are remarkably efficient for retailers, as they provide upfront revenue without any immediate product cost. And, back in the shopping case, redemption typically brings customers back into the store or onto a website, where baskets generated routinely exceed card value and thus stimulate incremental, not just deferred, sales.
Next Phase
The gift card sector continually evolves. For example. Klarna, which today operates as a digital bank and flexible payments provider, most recognized for buy-now-pay-later services, has expanded its partnership with BHN. Klarna now offers its services on Blackhawk’s Giftcards.com site as well as with BHN partner brands, a group that includes retailers, restaurants and even streaming services.
Some things to keep in mind when looking at gift cards going forward, Benedict said, include that breakage, the part of gift card purchases that go unredeemed, is lower than in the past but still meaningful. Retailers, for the most part, treat breakage as pure margin, which quietly bolsters financials.
Redemption behavior continues to drive operational considerations, especially in January, when gift card spending can meaningfully influence comparable sales and inventory flow. In addition, category expansion continues, especially in experiential gift cards, hybrid cards including multi-retailer versions, and digital gaming ecosystems.
On the less pleasant side of the occasion, fraud remains an issue with gift cards, particularly with digital cards and card-number harvesting. However, retailers are investing heavily in fraud prevention. For its part, Target has redesigned its proprietary gift cards to help deter fraud. Gift card access codes printed on the back give determined fraudsters the chance to steal the numbers before they’re sold and drain the cards after they’re purchased. Now, Target gift cards sold in the company’s stores have a blank space where these codes used to be. When it’s time to purchase, the Target checker applies a security access label to the gift card, reducing the risk of fraud.
And more is being done. In November, Digimarc Corp. and Honeywell announced they had begun working together to help retailers and brands fight gift card fraud. In a global gift card market valued at $1.24 trillion in 2024 and projected to reach $2.31 trillion by 2030, gift card losses have been mounting, increasing 364% from 2018 to 2021. According to the partners, 23% of U.S. consumers have given or received gift cards with no funds, indicating that gift card fraud is now a persistent problem. Honeywell has configured its handheld scanners to detect Digimarc’s new digital security layer for gift cards, enabling retailers to automate tampered-card detection and prevent activation at the point of sale.
The holidays are a good time to reconsider the value of gift cards, yet their influence has become pervasive. Gift cards even have their own deals week now. With support from BHN, 2025 saw a National Gift Card Week from December 7 to 13, featuring limited-time deals. Participating retailers, including giftcards.com, Giant Eagle, Kroger, Publix, ShopRite and Target, provided digital discounts and bonus in-store and online rewards. Deals included up to 20% off select gift cards, bonus fuel points and special multi-brand gift card discounts that offered consumers the attraction of stretching holiday budgets without sacrificing thoughtful giving, as BHN characterized it.
