Why are Gift Card Authorization Rates So Low? How Can You Improve Them?
Blog post from Basis Theory
Gift card authorization rates are estimated to be 5–10% lower than those for standard credit cards, largely because branded gift cards have fixed balances that can be exceeded by taxes, shipping, pre-authorizations, or tip allowances. Store, or closed-loop, gift cards are managed entirely by individual merchants and provide full program control and potential revenue benefits, but also require the merchant to handle fraud prevention, administration, and outstanding-card liability. Branded cards operate through major payment networks, giving merchants less control but reducing operational responsibility and offering access to network marketing, partnership incentives, and revenue-sharing opportunities. Authorization failures for branded gift cards commonly stem from customers not knowing their remaining balances, purchases exceeding loaded funds, and temporary authorization holds at gas stations, hotels, restaurants, and similar businesses. Merchants can reduce customer friction by clearly communicating total costs, explaining insufficient-funds declines, and considering follow-up outreach when otherwise viable purchases fail solely because of a low gift card balance.
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