Cheaper than traditional paper gift cards, prepaid “swipe” gift cards are more and more becoming a tool of small businesses.

This is according to a new article in the LA Times, which shows a low, but increasing, number of merchants turning to what has traditionally been a sales tool of much larger businesses: plastic gift cards.

“Small merchants are finally seeing that gift cards are offensive weapons,” said T. Jack Williams, president of Paymentcard Services Inc., a consulting firm in Henderson, Nev. “They are beginning to understand the cards can drive the incremental sales that are key to survival in this economy.”

The numbers are still small. Only about 8% to 10% of small and mid-size merchants use gift cards, said Gregory Grove, president of ECard Systems Inc., a gift-card supplier in Brentwood, Tenn., that targets small and mid-size businesses. Two years ago that portion was about 2%, he said.

He said he could set up a gift-card operation for a small store for about $500 plus a small monthly fee. A basic machine needed to swipe the cards costs about $300 more. The industry is only “at the beginning of that process, rolling out into the small-merchant marketplace,” he said.

Great article, particularly if you’ve been looking to get into this lucrative area. Read the whole thing here.