Gift Cards Versus Cash: How To Choose The Right Rewards & Incentives

Of course, with the rise in rewards and payout software, sending cash or even sending money transfers is quickly becoming obsolete. 

Recipients today expect to get their rewards now, and, like we’ll explore below, gift cards tend to align better with both their expectations and with your business objectives.  

Is cash king?

Maybe it’s hard to believe, but even in 2024, you’ll still hear claims that ‘cash is king.’ But if ‘cash is king,’ then why are so many more companies turning to gift cards and prepaid cards instead of traditional cash bonuses to inspire, engage, and connect with their teams and customers? 

Historically, cash has been viewed as the epitome of flexibility and simplicity in rewards systems. Yes, it's universal and easy to use. But as we move forward, the drawbacks of cash as a reward are becoming more and more apparent, making it less effective in today’s dynamic reward landscape.

There’s no doubt that cash bonuses are straightforward. But they also tend to merge into the everyday funds of recipients. This means they’re often spent on mundane necessities rather than on something truly memorable or impactful. Any excitement from the reward is short-lived. 

“Cash rewards are not memorable,” says Giftbit CCO Nat Salvione. “They lack the personal touch and the emotional connection that can make rewards truly impactful.”

Moreover, cash bonuses don’t offer the visibility and shareability that most modern companies now want from their rewards programs. That’s because cash bonuses tend to be viewed as private affairs. When employees receive cash, they’re likely not going to be sharing it with their friends, and their friends won’t be celebrating them for it. 

This lack of shareability means that cash rewards will have fewer positive social effects within a workplace or community, such as boosting morale or fostering a culture of recognition.

Ultimately, while cash may still hold sway in some traditional contexts, its role as the reigning king of rewards is increasingly challenged by more adaptable and personalized alternatives. 

In its place, gift cards and prepaid cards are emerging as the clear winner. 

What is a gift card?

Simply put, a gift card is a prepaid stored-value card used by individuals for making purchases within a specific network of retailers or service providers. 

Note: the term ‘gift’ in ‘gift cards’ refers to their nature of being preloaded with a set amount, which is not intended to be reloaded—these cards are typically a one-time-use financial tool.

It’s crystal clear from decades of academic studies that people love getting gift cards. For example, we know that 2 out of 3 people who receive a gift card as an incentive will remember:

• Why and how they earned it
• What they redeemed it for
• The company who gave it to them and their positive associations with it 

For most rewards and incentives programs, non-cash rewards like gift cards and prepaid cards are better options. People tend to see them as more thoughtful and engaging, so your recipients are likely to remember and appreciate them long after the transaction. 

Gift cards also encourage recipients to treat themselves to something special, elevating the perceived value of the reward.

Bottom line: gift cards are not just financial instruments. They are also tools for engagement, motivation, and personalization in rewards and incentives efforts. 

Gift cards vs prepaid cards

If you’ve spent any time Googling digital reward cards, then you’ve likely stumbled upon the two different types of them: open-loop and closed-loop. 

Note: you do not need to understand the following nuances of open and closed loop cards before you start sending them! 

Open-loop cards, such as those from Visa or MastercardⓇ, are classified as prepaid cards. They are preloaded with an available balance that acts as a spending limit. The recipient can use them to make purchases wherever these cards are accepted.

Examples of prepaid cards are the Virtual Visa Incentive Card and the Virtual Prepaid Mastercard. 

On the other hand, closed-loop cards are retailer-specific and can only be used at particular stores or chains, which makes them more personalized but less flexible than their open-loop counterparts. It’s these types of cards that are actually classified as gift cards. 

Examples of gift cards are Giftbit Starbucks gift cards and Amazon gift cards. 

Whether open or closed-loop, both are similar in terms of convenience and choice, improving the gift-giving experience in ways that cash simply can’t. 

And again, you don’t need to know the ins and outs of closed loop vs open loop cards to start using them. What you do need to know is whether your gift card platform can send both, giving you the flexibility to choose what works best for your given needs and recipients. 

Why do companies give gift cards instead of cash?

Companies choose to give gift cards instead of cash to enhance the impact of their rewards. Gift cards offer a personalized touch that cash cannot match, making them more memorable and engaging for recipients. 

Overall, gift cards simply work better for promotional strategies and align better with corporate goals for the following five main reasons. 

1. Gift cards feel more personal

Gift cards empower companies to offer rewards that feel more personal and tailored to the individual. 

Unlike cash, which can feel impersonal and generic, a gift card to a favorite store or for a desired service can make the recipient feel recognized and valued. Giftbit also allows you to customize templates for delivery, further enhancing the personalized experience. 

It’s this personal connection that can significantly boost employee morale and customer loyalty, making digital rewards a great option for corporate gifting and other incentives programs. 

2. Gift cards offer more variety

People think of different things when it comes to rewards and incentives. Some people like getting ‘stuff’ like tech or clothing. Some type of travel is often a popular incentive, while some people like straight monetary rewards in the form of prepaid cards. 

And of course, we all know that employee recognition is incredibly important for employee engagement. 

A straight cash reward only meets one of these preferred types of rewards, and, like we’ve covered, it tends to go straight into a bank account, where it’s quickly subsumed and forgotten. 

Meanwhile, gift cards cover all four types of preferences, providing you (and your recipients) with the freedom to choose whatever you like. 

Remember that we live in a world where broad consumer choice is the norm—and it’s expected, too. 

Plus, giving this level of choice demonstrates trust in your audience, and it also acknowledges all the differences that may compose your audience. 

3. Gift cards are more operationally sound

Gift cards come in a wide range of values. They can be sent digitally or displayed in-app. They can be retrieved or recovered if lost or damaged. And they are guaranteed to be well received. 

Win-win-win-win.  

4. Gift cards are easier to send and track

Distributing gift cards, especially digital ones, is logistically simpler and more cost-effective than handling cash.

For example, watch a quick demo now to see how easily you can get a gift card-based rewards program up and running. 

Digital gift cards in particular can be sent instantly in a variety of ways, including via email or text message. 

And they are easily trackable, reducing the administrative burden and security concerns associated with distributing physical cash.

You can also get much more detailed information about how people are interacting with your reward program. For example, Giftbit’s reporting and tracking features provide insights on delivery, redemption, and user behavior, allowing you to monitor your ROI—and improve it. 

This makes gift cards particularly appealing for companies managing reward programs at scale.

5. Gift cards create a bigger emotional impact

Gift cards create lasting memories and stories, which cash seldom does. They are more likely to be remembered by recipients as a special treat, especially when used for experiences or significant purchases. 

This lasting impact is beneficial for companies aiming to build a long-term relationship with their employees or customers, as it keeps the company in positive regard every time the card is used or remembered.

“Gift cards get results,” says Salvione.

The strategic use of gift cards over cash allows companies to provide more than just a monetary value—they offer an experience, a memory, and a valuable tool in building lasting relationships and engaging with a broad audience effectively.

In other words, digital gift cards and prepaid cards are the new king! 👑