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How do iTunes gift cards (vouchers) work?

An iTunes gift card (voucher) has a monetary value.

$25 iTunes Gift Card

When you redeem it in iTunes this value is added to the balance of your iTunes account.

Redeeming an iTunes Gift Card

iTunes Gift Card successfully redeemed

iTunes Account Credit

The gift card balance has been successfully transfered to your iTunes account and you can throw the code away. When you buy stuff in the iTunes store it will deduct from the balance in your iTunes account until it is finished.