They’re both called gift cards, but closed loop and open loop gift cards aren’t the same. Find out what’s different.
In a recent blog post, I explained “why Visa® gift cards cost more than store or restaurant gift cards.” The short answer to that question is that the load value on a closed loop gift card is guaranteed revenue because the gift card can only be used at the merchant’s business. However, open loop gift cards can be used anywhere, so the revenue stream is different. In the infographic below, you’ll find all the ways in which Visa gift cards differ from store gift cards.
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When consumers discuss gift cards, they typically lump all of the little plastic rectangles (store gift cards, restaurant gift cards, Visa gift cards, prepaid cards, reward cards, promotional gift cards, merchandise credit gift cards and more) into one, all-encompassing category. While these cards are very similar, consumers need to remember that open loop gift cards are extremely flexible–they can be used almost anywhere. But that flexibility comes at a price which includes possibly paying an activation fee, paying non-use fees if the card isn’t used within a year and being mindful of an expiration date. Store and restaurant gift cards, on the other hand, have no expiration dates or fees, but they can only be redeemed at designated locations. The good news for consumers of all types of gift cards is that the terms and conditions must be clearly disclosed at time of purchase. Finding out which rules apply to the gift card in your wallet is as simple as reading the back of the card.
If you think I missed something in comparing these plastic apples to oranges, let me know in the comments below or send me a message on Twitter (@GCGirlfriend).
Happy Gift Carding!
~Shelley Hunter, Gift Card Girlfriend