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What Is the Difference Between Closed-Loop and Open-Loop Prepaid Cards?

Prepaid cards offer something for every customer need, from store-specific gift options to a system for monthly budgeting.

By Erin Del Conte | February 16, 2021

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Prepaid cards are increasingly popular with customers whether as a means of gift giving or budgeting. Most convenience stores offer a range of physical gift cards — and many are providing an option for digital gift cards as well. Customers can select between two main types of prepaid cards —closed loop or open loop.

A closed-loop prepaid card is what customers traditionally think of as a store gift card. Closed-loop cards are specifically for use at a designated store. Some convenience stores sell closed-loop cards specifically for their convenience stores, along with cards for various hardware stores, quick-service restaurants and retail establishments. The gift card to Starbucks that you received for you birthday is a closed-loop prepaid card. It only works if you bring it to Starbucks. If you try to use it at Dunkin’ Donuts or the local 7-Eleven, they won’t be able to accept it.

An open-loop prepaid card, by contrast, does not have a designated store listed on the card. Customers can identify these cards because they have the Visa, Mastercard, American Express or Discover logo pictured on the card. The cards can be used anywhere that specific credit card is accepted. Because credit cards are accepted at most establishments, this means these cards can be used almost anywhere. Open-loop cards often come in specific increments like $25, $50 or $100. Many customers use these cards to budget for various monthly expenses, a practice that is especially used by those without bank accounts. These cards are also used as gift cards, so recipients can use them at the location of their choice instead of being limited to using them at one establishment.

General purpose reloadable (GPR) cards are open-loop gift cards that do not have a set dollar amount. Customers or gift givers can load funds onto these cards in any increments they choose, and then reload them with more money once the funds are used.

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