Gyft, a mobile gift card provider, has launched a loyalty system that gives different levels of rewards based on the funding method, favoring alternatives over credit cards.

Users that purchase gift cards using credit cards will get 1% back in points, and those who use PayPal will get 2%. But the biggest reward value, at 3%, is reserved for those who pay with the digital currency Bitcoin, which Gyft began accepting in May. Gyft added PayPal support today.

"We felt that for alternative payments mechanisms to succeed, we have to ensure that customers are better off than paying with a credit card," says Vinny Lingham, CEO of Gyft.

Because Bitcoin transactions are free or near free, an increasing number of merchants have started accepting the digital currency.

Points can be used to purchase more gift cards on the company's site from merchants including Burger King, Marriott, Nike or Staples. One hundred Gyft Points is equivalent to $1. There is also no cap on the amount of points a consumer can earn.

Since Gyft's launch in September 2012, the company has sold more than 200,000 mobile gift cards, Lingham says. The average amount put on the cards is around $100, he says.

Many consumers, especially Bitcoin users which demographically are between 18 and 44-years-old, are purchasing the cards for themselves, not as gifts, Lingham says.

"We have a ton of Bitcoin users that don't have a bank account, never have and don't want one; Gyft is their wallet," Lingham says. "We're really trying to focus on the personal consumption market as well…like people that use prepaid cards to budget and what not." 

While Gyft is currently available only in the U.S., the company is looking to expand internationally soon. Gyft plans to move into Canada, the U.K., Australia, New Zealand and South Africa, Lingham says.

"In foreign markets credit cards aren't as prominent as in the U.S.," he says. Plus demand is high in those regions, he says.

Adding PayPal acceptance makes sense for the company as it expands internationally, says Lingham. PayPal has more than 100 million users worldwide.

Gyft is giving away more than 10 million points by the end of the year as part of the rewards program launch.

Other payment companies are trying to appeal to Bitcoin users and merchants alike. BitPay, a Bitcoin merchant services business, pitches its services to high-risk merchants that might have been turned away by mainstream payment companies.

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