Gift cards have become a year-round payment vehicle, in part because birthdays are the most popular occasion for prepaid purchases. However, even with other spikes in prepaid shopping throughout the year—such as Dads and Grads season in June—the holidays are still the single most popular time to purchase prepaid products.
As Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, detailed in the 2025 Prepaid Holiday Preview: Gift Cards Could Provide Safe Harbor report, many factors are creating a new prepaid environment this holiday season. These factors have also unlocked powerful opportunities for retailers.
What Shoppers Want
One challenge looming over this year’s holiday season is the macroeconomic environment, which has continued to keep consumers under pressure. Inflation has remained high, as have interest rates, although an interest rate cut could be on the horizon.
Consumer spending has marginally increased in recent months, but the emphasis remains on staple items as opposed to discretionary spending. Along with these issues, potential tariff impacts loom.
“I think there’s a likelihood that there are going to be some shortages of some physical products, because no one knows what to ship, what not to ship, or how much to make,” Hirschfield said. “It’s not that consumers are going to necessarily spend a lot less for the holidays. I think they’ll spend a little bit less. They may have less to physically buy, which goes to the benefit of gift cards.”
As consumers navigate their holiday shopping, two major considerations come into play: what the recipient wants and what the giver wants to buy.
Overwhelmingly, recipients prefer to receive cash and cash equivalents. Their first choice is a general-purpose gift card, such as those offered by the major credit card companies. Their next two preferences are cash and retailer gift cards.
After all these options come physical gifts. Typically, consumers don’t want physical gifts because many have specific preferences and don’t want to engage in the return process. Some recipients would even prefer funds in their peer-to-peer (P2P) account—another cash equivalent—rather than a physical gift.
“Conversely, how do you want to give a gift?” Hirschfield said. “This is what really matters because this is where the transaction happens. The cash number goes way down, and you’re looking at 10% to 12% of people who prefer to give cash, and almost half prefer gift cards in one form or another.
“It’s slightly tilted towards the retailer-specific gift cards because there’s a bit more of a personalization feel. ’I want you to go to this specific retailer because I know you like their shirts, or I know you want to get new headphones, so go to an electronics store.’ It makes the giver feel like they are giving something a little more personal.”
Positioned as Prime Merchandise
The one commonality among recipients and purchasers is the popularity of gift cards, regardless of type. It’s a theme that will continue into the holiday season.
“What we see is that among people who bought a holiday gift card last year, 96% are likely or definitely going to buy a gift card again for the holidays this year,” Hirschfield said. “Around 81% are going to spend a similar amount, 16% are going to spend more, and only 4% are going to spend less. That’s a net increase in spending in gift cards—not a necessarily huge net increase, but it is a net increase in spending.”
Due to the strong preference for prepaid products and the projected increase in spending, retailers should consider gift cards prime merchandise and position them accordingly.
The most popular in-store locations to buy gift cards are the multi-brand, multi-card displays found in large grocery stores, pharmacies, or general merchandisers like Walmart and Target. The next most popular place for gift card purchases is at a specific retailer’s store.
In addition to in-store placement, retailers should consider how gift cards are displayed.
“We have good research we added this year, which says that 61% of people are going to choose a gift card because it has the right messaging—so you need your ‘Happy Holidays’ gift cards ready to go,” Hirschfield said. “49% are going to purchase because the display caught their attention, so that effort matters.
“The other thing is don’t discount that physical gift desire of the purchaser. Nearly 40% are going to be swayed by ancillary packaging, so if you can make a nice package out of a gift card, it makes it feel like more of a physical gift.”
After multi-card displays and retail stores, the next most popular option for gift card buying is at a retailer’s website, including digital cards and physical gift cards that are shipped. This means that along with positioning gift cards front-and-center in their stores, merchants should have gift cards prominently displayed on their website.
A Critical Story
Wherever the gift card is purchased, it represents an important opportunity because prepaid products are often the first touchpoint in customer relationships.
“It works both for the purchaser and the recipient, because the purchaser might be also incented,” Hirschfield said. “We have a lot of good research that says if you offer one of those incentives—buy a $25 gift card, get a $5 gift card—the purchaser is influenced by that. They may be getting their own gift card just for buying someone else a gift card. That’s where the relationship can begin.”
The numbers bear this out: Hirschfield found that roughly 45% of consumers who receive a gift card to a brand they have never used before will become a repeat customer.
Additionally, nearly half of gift card recipients will join the company’s loyalty program, around 42% will download the company’s app, and nearly a quarter will deposit funds into a retailer’s stored-value account wallet.
“The gift card has opened up this incredible opportunity to introduce someone to a new brand and make them a very loyal and sticky customer,” Hirschfield said. “In turn, 19% are going to then refer that brand to someone else. So, you’re getting loyalty, but you’re also getting a referral, and that’s all from one simple product of a gift card. I think that’s a critical story.”
Stretching Into the New Year
Merchants have another, often overlooked opportunity to drive loyalty and engagement this holiday season. Many physical gifts will be given, and many of them will be returned.
Often, the recipient will receive store credit, which is essentially a gift card to the consumer. Accordingly, many consumers engage in the same behaviors with store credit as they do with gift cards, such as purchase totals above the allotted amount and joining a store’s loyalty program.
This opens new avenues for engagement. For example, a retailer could give consumers a bonus or incentive if they use their store credit within a certain period.
Because of the many aspects of prepaid products—and the significant benefits they deliver—retailers should begin developing their holiday shopping strategies now. However, due to the potential for returns and additional purchases, a robust holiday plan should stretch into the new year.
“There’s so much that needs to happen now to get ready for Black Friday and beyond,” Hirschfield said. “Additionally, retailers need to be cognizant that this is your opportunity to be ready for December 26 to the end of March. In that slower first quarter, you can work to implement engagement tools.”
