A gift card processing system and method utilizes a clearinghouse to bank, manage, and distribute the gift funds. The card is issued for contributing towards a transaction at a specific issuing merchant. The information (card reference information, value, and issuing merchant) is uploaded to the clearinghouse. The clearinghouse banks the monetary value until the card is used for a transaction. An exchange rate is established for use of the card at an exchange merchant, allowing the cardholder to use the card for a transaction at the exchange merchant. Upon completion of an exchange transaction, the clearinghouse provides payment equaling the amount transacted by the card, including the deducted exchange rate and any respective clearing fee. The balance of the banked card value is provided in payment to the issuing merchant.