Gift cards and store credit are often confused because both provide a store balance that customers can spend. They serve different business purposes and are implemented differently. Understanding the distinction helps you choose the right tool for specific customer scenarios – and in many cases, offering both makes sense.
Gift Cards: For New Customer Acquisition
A gift card is purchased by one person and used by another. The buyer pays money to the store today; the recipient spends it later, often for the first time on your store. This makes gift cards primarily a new customer acquisition tool. When someone receives a gift card to your store, they become a customer even if they would never have discovered you otherwise.
Gift cards also generate revenue in advance of product delivery (the buyer pays now; redemption happens whenever the recipient shops) and create breakage revenue when cards are never fully redeemed. For physical product stores, gift card recipients typically spend more than the gift card value – they add additional items to reach a higher total.
Store Credit: For Customer Retention
Store credit is issued by the store to an existing customer – as a refund alternative, as a loyalty reward, as compensation for a problem, or as an incentive to make a specific purchase. Unlike gift cards, store credit is not typically purchased; it is granted. Store credit keeps value within your store plugin library (customers spend it with you rather than requesting a payment refund) and incentivises return visits.
Common store credit scenarios: issuing store credit instead of a cash refund (keeps the revenue while resolving the customer’s issue), granting credit as a loyalty reward after a certain spend threshold, issuing credit as an apology for a shipping problem or product issue.
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Implementation Differences
Gift card plugins typically create purchasable gift card products with unique codes. Store credit is typically handled by a separate mechanism – either a dedicated store credit plugin or the loyalty points system in Advanced Coupons.
Advanced Coupons Premium handles both through its gift card and loyalty program features. For stores wanting both in one plugin, this is the most convenient option. For stores with more complex requirements, dedicated plugins for each (a gift card plugin plus a separate store credit or loyalty plugin) give more specific functionality per use case.
Combining Both in Your Store
Many successful WooCommerce stores offer both. Gift cards are sold as products, primarily as gifts. Store credit is issued administratively for refunds and rewards. Customers see both in their My Account page as separate balances or as a combined wallet balance depending on implementation. The key is making the UI clear to customers so they understand which balance they are using at checkout.
Breakage and Unclaimed Balances
Gift card breakage is the revenue you keep from cards that are never fully redeemed. Industry averages suggest 10-19% of gift card value is never redeemed. This is genuine revenue – you provided the card, the customer chose not to use the full value. For a store doing $10,000 in annual gift card sales, $1,000-1,900 in breakage is realistic. Breakage accounting treatment varies by jurisdiction; some countries require dormant balances to be reported to government unclaimed property funds after a certain period. Store credit breakage works similarly when credits expire or accounts are inactive.