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TDS 101: Full-Drain vs. Transactional Gift Cards

Gift cards have become ubiquitous in modern commerce, simplifying how we give and receive presents. However, not all gift cards are created equal. A key distinction sets them apart: how they handle your funds. There are two main approaches with gift cards:  full-drain and transactional. Full-drain gift cards add the entire balance to your account at once upon redemption, providing a seamless and convenient experience. On the other hand, transactional gift cards only utilize the funds required for individual transactions, leaving the remainder stored on the card for future use. Transactional gift cards also often allow reloads or top-ups so users can continue to add funds to them. In this blog, we’ll explore the benefits of full-drain gift cards, utilized by industry giants like Apple, Amazon, and DoorDash, and in what instances they may be preferable to transactional gift cards.

Redemption Fraud Mitigation

One of the primary reasons many gift card programs opt for full-drain gift cards is the mitigation of redemption fraud. Transactional gift cards often require a public balance check function, which can be exploited by fraudsters attempting to guess card numbers and PINs. However, transactional gift card programs also often allow users to be more anonymous by not associating a card with a specific user account. However, this approach moves them closer to a wallet concept already utilized by full-drain programs, making it easier to manage multiple cards securely. 

Driving Loyalty

While transactional gift cards offer elements of loyalty, full-drain gift cards (and digital wallets, by extension) provide a more robust platform for driving loyalty actions. Wallets enable businesses to effectively incentivize desired customer behaviors. For example, offering rewards for adding funds to the wallet during transactions can reduce payment processing costs and encourage users to remain engaged with the platform.

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Additional Funds, Bonuses, Promos

In the world of e-commerce, promotions, bonuses, and refunds play a crucial role in attracting and retaining customers. A wallet system offers a convenient place to house such incentives. For brands facing challenges with issuing refunds, directing funds to the wallet instead of back to the payment card can be a game-changer. This approach keeps funds within the platform and reduces opportunities for fraud. Promos and bonuses can also find a comfortable home within a wallet, providing a seamless experience for customers.

Avoiding Checkout Interruption​

Surprisingly, redeeming a gift card during the checkout process disrupts the user experience and can potentially reduce conversion rates. To counteract this, businesses can encourage gift card recipients to redeem their gift cards as soon as possible. This proactive approach enhances user acquisition metrics and delivers the advantages discussed earlier. By adopting the full-drain gift card or wallet approach, companies can streamline the redemption process and provide a smoother, interruption-free checkout experience.

How TDS Can Help

While there are valid reasons for both full-drain and transactional gift card approaches, it’s clear that the former offers several key advantages that can significantly improve the customer experience and security of gift card programs. TDS Gift Cards offers our clients a comprehensive solution for full-drain gift cards, including program management, processing, and distribution for full-drain cards and access to the TDS Digital Wallet API to integrate those cards into your brand’s economy. Are you interested in learning more? Reach out to Info@TDSGiftCards.com today.

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