There’s always that one person on your Christmas list who’s like, “Honestly, just some gift cards would be great.”

I mean, agreed. ✋

After all, instead of receiving a cool but not-exactly-your-style gift, having the choice to pick out whatever you want? I would prefer that any day.

So when we think about rewards in the workplace, gift cards are a no-brainer. As the most prevalent award type, the gift card industry is booming, with U.S. companies spending $24 billion annually on gift cards.

But why? 🤔

This article will cover why, exactly, so many companies use gift cards, or “non-tangible cash rewards,” to engage, motivate, and recognize their employees, and why those companies are making a great choice.

Understanding the two types of gift cards

Before we dive deep into gift card talk, it’s crucial to establish that there are actually two types of gift cards. 💡

Each type of gift card, as it turns out, evokes a different psychological response in its recipients.

Open loop

An example of open-loop gift cards would be something like a VISA prepaid card. These gift cards can basically be considered cash, and are thought of as “open loop” because theoretically, you can redeem them for anything you want, anywhere you want.

Closed loop

In contrast to open-loop gift cards, closed-loop gift cards are gift cards meant to be redeemed at a specific store or experience. Amazon or Target gift cards can be considered retail closed loop, whereas gift cards to Airbnb or Southwest Airlines can be considered a more experiential closed loop.

Why you shouldn’t focus on open-loop gift cards

Cash and open-loop gift cards aren’t as memorable or exciting

The Incentive Research Foundation (IRF) found that the preference for cash (including open-loop gift cards) and reward earner salary are negatively correlated. A negative correlation means that the more money an employee makes, the less likely a cash gift would be considered impactful for them.


The IRF calls this psychology, “mental accounting,” and explains:

Cash rewards are known to trigger a process of mental accounting in recipients, in which the reward earner classifies cash rewards with salary… Subconsciously, people blend the cash reward with pay and use it for the same every day purposes—for example, paying the utilities, buying groceries and making car and mortgage payments. As previously alluded to, people tend to make utilitarian purchases when given a cash reward, and consequently derive very little meaning or appreciation from the latter.

–Incentive Research Foundation, Award Program Value & Evidence

The same psychology goes into receiving open-loop gift cards. Since you can redeem them for anything, recipients are more likely to spend them on “chore” purchases, like gas or bills.

However, with closed-loop gift cards to specific retailers or experiences, recipients are much more likely to find meaning and value. For the rest of this article, we’ll focus on closed-loop gift cards.

Why gift cards work

Gift cards are flexible enough for every budget

Gift cards can grow with your budget and come at varying price points.

As it turns out, giving away a $5 Starbucks gift card to someone on your team for doing a great job sparks the same psychology of appreciation as buying them a latte! ☕

It’s incredible what the right framing and specificity can do for a reward.

According to Incentive Magazine, gift cards “can be doled out across a spectrum of denominations for both big and small rewards.” No matter your budget, there are a plethora of gift cards you can buy to connect with your employees and have them feel appreciated without spending a ton of money.

Gift cards can easily scale with your budget, and they’re offered in both physical and digital forms.

Employees can treat themselves


Gift cards can allow your employees to really treat themselves!

Think about it—when you get a cash bonus, you’d probably spend it on something responsible, like sticking it into your savings account, or paying back student loan debt. While this is definitely beneficial, treating yourself with things or experiences you enjoy is also important!

Often when an employee receives cash, it simply goes into the large “hole” of day-to-day costs like mortgage repayments, loans or energy bills. Gift cards can allow for guilt-free spending to buy something tangible that they may have been wanting to purchase for some time such as new golf clubs or running shoes.

Ovation Incentives

So, get a closed-loop gift card to allow your employee to purchase something for themselves! You can also combine gift cards with monetary bonuses, which will allow your employees to splurge on themselves while not feeling bad about it.

Gift cards have the same psychological impact as experiences

Experiential gifts have gotten a lot of hype recently, for good reason! Experiences are certainly much more memorable than things.

But did you know that closed-loop gift card rewards, also known as tangible non-cash rewards, are just as motivational as experiential gifts? Yep. Especially when you combine it with meaningful recognition and appreciation!

Experience and gift cards are fun, but the real power of rewards lies in the appreciation you give to your employees while providing the gift. Thoughtless experiences seem better than appreciated gift cards because at least you’ll get to go to a concert, even if you don’t feel valued, right?

According to Deloitte, “There is a correlation between employees who say they are “happy at work” and feel “valued by [their] company” and those who say their organization has a clearly articulated and lived culture.”

If your company culture is essential to you, your focus should be on building how many employees feel valued, not just having cool workplace rewards.

5 best practices for using gift cards as rewards and incentives

When it comes to giving gift cards away as rewards and incentives, it’s best to follow these best practices so that your gift cards are well-received.

Utilize closed-loop gift cards whenever possible

As we’ve discussed, closed-loop gift cards are the best gift cards to give. While open-loop gift cards are nice because you can spend them on everything, they don’t truly allow you to splurge.

If you get an open-loop gift card, you’re likely to spend it on something mundane like gas for work or a small bill you need to pay. Closed-loop gift cards give us the ability to buy something just for us.

Include a personal touch with your gift cards


If you want to take gift cards to the next level, add a personal touch to them. Instead of giving out a random Starbucks gift card, pick a gift card like you’d choose a gift for someone. If you know a person on your team is expecting a baby, moving to a new place, or going on a dream vacation, tailor your gift card choice to who they are and what they need at that moment.

Here’s one way to add a personal touch to your gift cards: create a story around them. For example, if you know an employee has been especially burning the midnight oil for a difficult project, put together a self care-themed reward with gift cards to a spa and nice dinner!

Eliminate overchoice

Too many choices can cause issues with your gift card rewards program. You may think that people don’t like your program, but they’re likely just overwhelmed by the choices you offer. If you have a sheet that lists all your gift cards, looking at that list of options can feel daunting.

Instead, give your employees voice and choice by aligning your gift card offerings to your company values.

You’d probably want the old standbys like Amazon and Starbucks as options, but if your company emphasizes voracious curiosity, gift cards to bookstores, movie theaters, and airlines would only reinforce those core values!

Plus, Bonusly’s Reward Catalog offers the opportunity to contribute to charitable organizations, where your employees can make a real impact.

Make sure gift card value meets store expectations

As we discussed, gift cards are flexible. While gift cards allow you to pick a wide array of denominations, you need to be careful that the gift card value meets store expectations.

For example, a $30 gift card to the local movie theater makes sense. You can see a couple of movies or maybe have a night out to the movies with your partner for that amount.

But if you give someone a $30 gift card to the Apple Store, your gift won’t be near as appreciated. Most of the products at the Apple Store start at a few hundred dollars! Your employees won’t be able to spend their $50 gift card without spending a good amount of their own money.

So, make sure you match store expectations to each gift card you give to employees. Are you setting your employees up to be disappointed when they realize they can’t afford to shop at a store, even with a gift card? 😬🙈

Pair gift cards with explicit recognition and appreciation


Lastly, our biggest piece of advice is to pair your gift cards with explicit recognition. When you match gift cards with gratitude and appreciation, you can really accelerate your rewards program and build the commitment and engagement your employees feel for your company.

Giving gifts—any kind of gift—is terrific, but can feel empty or shallow if it’s not paired with thought and appreciation. Pairing a gift card with praise is how you make a gift card feel just as good as an experiential reward.

Rewards confer recognition, at least implicitly. But to maximize impact, every tangible reward should come with explicit appreciation– a thank you for the specific behavior or accomplishment a person is being rewarded for.

Incentive Research Foundation

Here are some tips for pairing gift cards with recognition:

  • Include a thank you note with your gift card
  • Give away gift cards in meetings or award ceremonies, and explain why you chose the gift cards you did
  • Give gift cards at meaningful milestones, like work anniversaries or birthdays

Key takeaway

Gift cards are a wonderful way to treat your employees.

When gift cards are paired with the right amount of recognition, even a $5 reward be really meaningful. When our employees feel valued, they feel attached to our company culture.

Experiential rewards are great—and there are gift cards for those experiences! 😉

Bonusly gives you tons of options in our global rewards catalog. Your employees can choose between gift cards of every category, and can even donate to a charitable organization of their choice. Want to offer something extra special? Custom rewards give you the ability to give something unique to your employees, like coffee with the CEO or fun swag.

The most important thing you can do is mix up the rewards you offer. Let your employees choose which rewards excite them, and then create a rewards catalog your employees love. For more excellent rewards ideas, check out this resource:

Read the Guide to Modern Employee Recognition