Shopify Store Credit vs. Gift Cards

In e-commerce, both store credit and gift cards are popular tools used to incentivize purchases and boost customer loyalty. While each has its merits, Shopify store credit often proves to be more effective than traditional gift cards for driving repeat business and customer engagement. This article provides an overview of gift cards and store credits in Shopify, then delves into why store credit can offer greater value for merchants. We'll explore how store credit enables targeted campaigns, encourages customers to maintain a positive balance (through cashback rewards), creates urgency with expiration dates, and improves versatility and cost-effectiveness. The goal is to clarify key differences and offer insights in a professional, structured format for Shopify store owners and managers.

Gift Cards vs. Store Credit: Key Differences

Shopify Gift Cards - A gift card in Shopify is essentially prepaid store value that a customer purchases to give to someone else (What Is Store Credit? How To Use It To Sell More (2024) - Shopify). Gift cards have a fixed amount loaded onto a code (or physical card) and can be redeemed by anyone who possesses that code. They are commonly used for gifting or promotions and can be applied across one or multiple purchases until the balance is used up (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps) (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps). Importantly, the recipient of a gift card doesn't need an existing account; the value is accessed via the gift card code at checkout.

Shopify Store Credit - Store credit is a virtual currency within a Shopify store that the merchant issues directly to a customer's account (Store Credit Overview | memberr Docs). It is typically granted as a result of returns, refunds, loyalty rewards, or promotional campaigns rather than purchased by the customer (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps). Unlike gift cards, store credit is linked to an individual customer’s profile and cannot be transferred - the balance is stored in the customer’s account and is automatically available to apply at checkout for that customer (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps). Store credits usually remain within the store's ecosystem (they can't be cashed out), encouraging customers to come back and spend their credit on future purchases (Store Credit Overview | memberr Docs).

Key differences at a glance:

Origin of Value: Gift cards are bought (often by one customer to give to another) and have a predetermined value. Store credits are issued by the merchant (e.g., in lieu of a refund or as a reward) and can accumulate or change over time based on customer activities (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps).
Transferability: Gift cards can be used by anyone with the code (they are intended to be transferable). Store credit is account-specific - only the designated customer can use it, as the balance is tied to their login (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps) (Differences Between Gift Card vs Store Credit On Shopify - VIFY - Perfect Shopify Apps).
Redemption Method: Gift cards are redeemed by entering a unique code at checkout, deducting from the gift card balance. Store credit requires no code; when the customer logs in, their credit balance is automatically applied or available for use during checkout, making the process seamless.
Use Cases: Gift cards excel in situations like gifting and acquiring new customers (they effectively turn one customer’s money into a credit for another person). Store credits excel at customer retention - for example, turning a refund into store credit keeps the money in your business and motivates the customer to make another purchase (Store Credit Overview | memberr Docs).
Expiration & Urgency: Gift cards often have long validity or no expiration (and may be subject to legal regulations on expiries). Store credits can be given with an expiration date or delayed availability at the merchant’s discretion, to create a sense of urgency for customers to return and use them. We'll discuss this strategy more below.

By understanding these differences, merchants can choose the right tool for the right purpose - gift cards for spreading the word and attracting new shoppers, and store credit for keeping existing customers engaged and coming back.

Ongoing Customer Engagement with Store Credit Campaigns

One major advantage of store credit is how easily it can be woven into marketing campaigns to continually engage customers. Store credit campaigns involve granting credit to select customer segments as a reward or incentive, and they tend to drive repeat purchases more effectively than one-time gift card promotions. Unlike a gift card (which is usually a one-off gift or incentive), store credit can be repeatedly issued in small amounts to encourage ongoing interaction with your store.

Merchants can leverage store credit in targeted promotions using Shopify's customer segmentation. For example, you might run a campaign to reward specific actions (purchases, referrals, writing reviews) with store credit, or to re-engage lapsed customers by offering a credit if they return and buy (Store Credit Campaigns | memberr Docs). Because store credit is tied to customer accounts, these campaigns can be highly personalized - customers receive credit offers relevant to their behavior and preferences, making the incentive more appealing. The result is a cycle of regular engagement: customers have a reason to check your site for new offers or to see if they’ve earned credit, keeping your brand top-of-mind.

Benefits of Store Credit Campaigns

Targeted Incentives: Store credit can be granted to reward specific customer actions or segments. For instance, you can issue credit for making a purchase over a certain amount, referring a friend, or as a birthday reward. This targeted approach ensures incentives reach customers who are most likely to return and spend more, maximizing the campaign’s ROI (Store Credit Campaigns | memberr Docs) (Store Credit Overview | memberr Docs).
Personalized Offers: Because store credit issuance can be tied to customer data, personalization is easy. You can tailor credit amounts or offers based on a customer's purchase history or engagement level. This relevance makes the credit feel like a personalized reward rather than a generic coupon, increasing the likelihood of redemption.
Continuous Engagement: Running recurring store credit campaigns (e.g., monthly credits, or credits for every 5th purchase) keeps customers regularly engaged with your brand. Instead of a one-time gift card use, customers are prompted to visit your store frequently to utilize new credits or check their balance. This sustained engagement builds a habit of shopping with your store.

(In contrast, gift card promotions are often one-off events; once a customer uses a gift card, the interaction may end. Store credit programs create a string of touchpoints with the customer over time.)

Driving Repeat Purchases with Positive Balances and Cashback

Another compelling benefit of store credit is the ability to maintain a positive balance in the customer's account through cashback or rewards, thereby encouraging repeat visits. Cashback as store credit means that whenever a customer makes a purchase, a percentage of the spend is returned to them in the form of store credit. This is a powerful loyalty mechanism: knowing they have some credit "waiting" for them gives customers a continuous incentive to come back and shop again.

With traditional gift cards, the value is fixed and depleted with use; there's no built-in mechanism to increase the balance unless another card is purchased. Store credit, however, can be replenished or increased through ongoing rewards. For example, a customer who spends $100 might get $5 added to their store credit balance as cashback. Now that they have $5 credit, they are more likely to return to use it - and when they do, studies show they often spend beyond the credit amount. In fact, giving customers a credit balance can encourage them to put extra items in their cart, leading to higher overall order values (What Is Store Credit? How To Use It To Sell More (2024) - Shopify). This effect is similar to how having a gift card often prompts additional spending, but with store credit the cycle can repeat continuously.

Benefits of a Positive Balance (Cashback Rewards)

Continuous Incentive to Return: A customer with an available store credit balance has a constant reason to revisit your store. Even a small credit (like a $5 reward) acts as a nudge for repeat purchases. By offering store credit instead of only one-time discounts or refunds, you retain the value within your ecosystem and prompt the customer to come back and use it (Store Credit Overview | memberr Docs) (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote). This strategy has been shown to increase customer retention and repeat sales.
Increased Spending per Visit: Store credit not only brings customers back, it often makes them spend more when they return. Customers will treat the credit as a discount or bonus and are likely to exceed that amount in their next purchase to fully utilize it (What Is Store Credit? How To Use It To Sell More (2024) - Shopify). For example, a customer with $20 credit might decide to buy a $50 item, effectively upselling themselves because they feel they're getting a deal.
Enhanced Loyalty: Continuously rewarding purchases (through cashback in credit form or loyalty programs) fosters a sense of appreciation. Customers see that their ongoing business earns them rewards, strengthening their loyalty to your brand. Over time, this can increase the customer’s lifetime value, as they prefer to shop where they get something back.
Alternative to Discounts: Store credit rewards can be a more sustainable alternative to blanket discounts. Instead of offering 10% off to everyone (which immediately cuts into your revenue), giving 10% back in store credit keeps the money in your store and encourages another sale. This way, you're effectively offering a perk without devaluing your product - a tactic that protects margins while still rewarding the customer.

Creating Urgency with Delayed Availability and Expiration

Scarcity and urgency are classic tactics in sales. Store credit programs allow merchants to introduce urgency by using delayed availability and expiration dates on credits. In other words, you can control when the credit becomes usable and how long it remains valid. These features are not typically applicable to customer-purchased gift cards (since gift cards usually need to be usable immediately and often are not allowed to expire quickly due to customer protection regulations). But with store-issued credit (which is essentially a promotional reward), merchants have more flexibility to impose conditions that drive timely usage.

Delayed availability means the credit is issued now but can only be redeemed after a certain date or event. For example, you might run a holiday promotion where customers earn $10 credit in December that only becomes active in January - this encourages them to come back after the holidays to use it, boosting post-holiday sales. Expiration dates on store credit create a "use it or lose it" scenario. If a customer knows their $10 credit will expire in 30 days, it creates urgency to make a purchase sooner rather than later, lest they forfeit that value (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote). By adjusting these parameters, merchants can strategically drive quicker purchase decisions and avoid having customers hold onto credit indefinitely.

Benefits of Timed Store Credit (Delays & Expiry)

Anticipation and Excitement: An availability delay can actually build customer anticipation. If customers see that they will receive a credit that activates next week or next month, they have a reason to return to your store when the credit goes live. This tactic can be tied to product launches or seasonal events to generate buzz and ensure traffic at specific times.
Urgent Purchases: An expiration date on credits creates a healthy pressure on customers to act. Knowing that "this $15 credit expires by month-end" is a strong motivator for customers to visit the store and use the credit while it lasts (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote). This often leads to faster sales cycles, as customers accelerate their purchasing plans to take advantage of the credit.
Reduction of Liabilities: From a business perspective, having credits expire by a certain date prevents open-ended liabilities on your books. It also lets you forecast and prompt sales in a defined period. Unlike gift cards that might remain unused for long periods (studies indicate a significant portion of gift card value goes unredeemed (What Is Store Credit? How To Use It To Sell More (2024) - Shopify)), promotional store credits with expiry are either used (driving revenue) or expire (removing the liability). Both outcomes can be beneficial to the merchant.
Active Customer Engagement: Urgency tactics keep customers actively engaged. Customers will pay attention to emails or notifications about their credit balance and expiry, and they may visit their account page more often. This increases interaction with your store. Even reminders about expiring credit are touchpoints that bring the customer back to your site, where additional purchases can happen.

(Note: When implementing expiration dates, always communicate clearly to customers about the time limits. Transparency will ensure it feels like an incentive, not a stealthy tactic. Additionally, check local regulations - in some regions, expiring store-issued credits is allowed as they are promotional, whereas customer-purchased gift cards often have legal protections against short-term expiration.)

Versatility and Flexibility of Store Credit

Store credit offers greater versatility and flexibility compared to traditional gift cards (Shopify Store Credit vs. Gift Cards). Because it is managed digitally and tied to customer accounts, store credit can be issued and adjusted in real-time to fit various business scenarios. This makes store credit a multi-purpose tool in a Shopify merchant's toolkit. By contrast, a gift card typically has a one-time fixed value and serves a narrower purpose.

Ways in which store credit shows its versatility include handling customer service situations (like compensating customers for a service issue or a delayed shipment with a credit), managing returns/exchanges, and running diverse loyalty or referral programs. For example, instead of refunding a customer in cash or asking them to exchange for a similar item, a merchant can issue store credit which the customer can use to buy anything else they prefer. This not only salvages a potentially lost sale but also leaves the customer with a positive experience (they get to choose a new item at their convenience) (Store Credit Overview | memberr Docs) (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote). Additionally, store credit can be seamlessly integrated into referral programs (give existing customers credit for referring new customers) or product review programs (reward reviews with credit), which are harder to execute with standard gift cards.

From an administrative standpoint, store credit is entirely digital in Shopify (especially with apps like memberr to manage it). There’s no need to produce physical cards or distribute codes unless you choose to - you simply adjust balances in the system. This flexibility means you can issue any amount of credit (big or small) at any time to any customer segment without incurring production or fulfillment costs. It also means credits can be customized per campaign or customer segment (e.g., VIP customers might get higher-value credits, new shoppers might get a welcome credit, etc.).

Benefits of Store Credit's Versatility

Customizable Rewards: Merchants have full control over the value and conditions of store credits. You can adjust credit values and distribution based on specific campaigns or customer tiers (Shopify Store Credit vs. Gift Cards). For instance, a marketing campaign might give a $20 credit to high-spending customers and a $5 credit to infrequent shoppers to incentivize each group appropriately. This level of customization is hard to achieve with gift cards, which are usually issued in preset denominations.
Easy Digital Management: Store credit is managed within the Shopify admin or through an app - no physical cards, codes, or third-party issuers are necessary. This streamlined management reduces logistical challenges (Shopify Store Credit vs. Gift Cards). For example, you can top-up a customer's credit instantly as a goodwill gesture after a support call, rather than mailing out a gift card or code. It also means less chance of loss or theft (customers can’t lose a store credit balance like they might misplace a gift card code).
Multiple Use Cases: A single store credit system can cover many scenarios. You can use it to handle returns (issue credit instead of refunds), encourage upsells (offer bonus credit for purchasing upgrades or bundles), recover abandoned carts (send credit to lure back a customer who left their cart), or drive customer actions (such as writing reviews or participating in surveys). Gift cards, in comparison, are not as commonly used in such varied ways. Store credit's broad applicability makes it a central part of a modern loyalty strategy (Shopify Store Credit vs. Gift Cards) (Store Credit Overview | memberr Docs).
Consistent Customer Experience: Because store credit is tied into the customer's account, the experience of using it is frictionless. Customers see their credit balance when logged in and can apply it with one click at checkout (or it may auto-apply). This is often a smoother experience than entering a long gift card code, especially on mobile. A smooth experience means customers are more likely to actually use their credits, deriving value from the program and feeling positive about your brand.

Cost-Effectiveness and Operational Efficiency

From a business perspective, store credit programs can be more cost-effective and operationally efficient than gift cards. Gift cards, especially physical ones, incur costs for design, production, and sometimes shipping. Even digital gift cards might involve purchase fees or lower margins if sold through third-party marketplaces. In contrast, issuing store credit directly to a customer account has minimal overhead - it's essentially a ledger update in your Shopify store. There’s no physical item to produce, and delivery is instantaneous and free (via email or account notification).

Additionally, because store credit keeps revenue internal, it can help reduce the financial impact of returns. Whenever you issue store credit in place of a cash refund, you are retaining that revenue (albeit as a liability until the credit is used) rather than losing the sale completely. This can protect your cash flow and reduce lost revenue. Retailers often find that a portion of store credit issued for returns never gets redeemed (or not fully redeemed), which effectively means less money out of pocket compared to full refunds. Even when credits are redeemed, they often lead to additional sales beyond the credit value, as discussed earlier, further benefiting the bottom line.

Operationally, handling credits can simplify processes. Accounting for store credit is straightforward since it is tracked in the Shopify system; you can view each customer's credit balance and usage history in their profile (Store credit - Shopify Help Center). This transparency makes it easier to manage liabilities. It also improves inventory management during returns/exchanges - rather than restocking and losing a sale, you issue credit and likely move other inventory when the customer buys something else. Shopify store credit programs (via apps) often come with dashboards and reports to monitor outstanding credits, redemptions, and campaign ROI, giving clear insight into the impact on sales.

Benefits of Cost-Effectiveness & Efficiency

Reduced Overhead Costs: With store credit, there's no need for physical card production or distribution (Shopify Store Credit vs. Gift Cards). This saves on materials and logistics. Even for digital gift cards, if you typically offer them at a discount via third parties or incur processing fees, store credit avoids those because it's an internal transaction.
Retained Revenue from Returns: Issuing credit instead of cash refunds means you retain the value of the sale (the money doesn't leave your business) (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote). This significantly softens the revenue loss from returns and can improve profitability. As one Shopify retailer put it, store credit ensures the customer “remains within your ecosystem” after a return and is likely to make another purchase with that credit (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote). In effect, store credit turns potential refunds into future sales opportunities (What Is Store Credit? How To Use It To Sell More (2024) - Shopify) (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote).
Simplified Accounting: All store credit transactions are recorded in your Shopify admin, making it easy to track balances and usage. This streamlines accounting and financial tracking, as you can run reports on outstanding credits. It is operationally easier than managing gift card codes and balances externally. Also, handling a return via store credit is often faster and less administratively burdensome than processing a refund back to a payment card (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote) (Store Credit Overview | memberr Docs).
Direct Value to Customer: When you issue store credit, the full value goes to the customer without intermediary steps. For example, a $20 store credit is a clear $20 value for the customer’s next purchase. There are no activation fees or delays - it appears in their account immediately. This direct approach can make customers feel valued (they got something of full value for free) and more inclined to use it quickly. With gift cards, especially third-party ones, sometimes a customer might face minor hassles (like entering codes, or partial balances on a card), but store credit in an account is straightforward.
No Discounting Necessary: Unlike coupon codes or sales where you mark down product prices (which can hurt margin perception and brand positioning), store credit lets you reward the customer without altering product pricing. The products sell at full price, and the reward is separate as credit. This can be more cost-effective in the long run, preserving product value while still giving customers an incentive.

TLDR: Choosing the Right Tool for Your Shopify Store

Both gift cards and store credit have a place in a Shopify merchant’s strategy, but they serve different goals. Traditional gift cards shine as a marketing tool for customer acquisition - they bring new shoppers to your store (when given as gifts) and allow fans of your brand to share it with others. They also provide upfront revenue when sold. However, gift cards are generally a one-time use per customer (until the balance is gone) and offer limited engagement beyond that transaction.

Store credit, on the other hand, is a powerful tool for customer retention and ongoing engagement. It offers a more dynamic, flexible approach to loyalty. By integrating store credit into campaigns and rewards programs, merchants can create continuous touchpoints with customers: rewarding them for purchases and actions, encouraging them to come back with cashback balances, and motivating prompt purchases through limited-time credits. Over time, this can significantly boost customer lifetime value and repeat purchase rates (What Is Store Credit? How To Use It To Sell More (2024) - Shopify) (How to Issue Store Credit on Shopify: A Step-by-Step Guide | Sleeknote).

In summary, while a Shopify gift card might get a new customer in the door, store credit keeps them coming back through a cycle of rewards and incentives. For merchants looking to build long-term relationships and maximize the value of each customer, a well-implemented store credit program can offer a more compelling and cost-effective solution than relying on gift cards alone. By leveraging store credit's advantages - targeted campaigns, positive balance incentives, controlled urgency, versatility, and low operational costs - businesses can cultivate loyalty and drive sustained growth in their Shopify stores.

Ultimately, the best approach may be to use both tools in tandem: continue offering gift cards for their unique benefits, but invest in a robust store credit system for retention. This combination allows you to attract new customers and then retain them, creating a win-win for your business. With the right strategy, Shopify store credit and gift cards together can enhance the customer experience and boost your sales, but if the goal is to deepen loyalty and increase repeat sales, store credit is the standout choice for an agile and modern e-commerce loyalty strategy.