A gift card is a prepaid debit card which contains certain amount of money and it can be used for different types of purchases. There are two types of gift card: open loop gift card and closed loop gift card. Traditional gift cards are physical cards which still dominate the market, taking up nearly 75% of the total market share. However, digital cards, or eGift cards, become increasing popular in today’s society, such as bonus gift cards given by department stores to their loyal program members.

How does it work?

Gift card is a prepaid debit card and it is loaned for future use. Customers can use both open loop gift card and closed loop gift card online and in person.

Normally, gift card has a minimum ($10) and maximum ($500) when it is loaded at first. Customers can use their gift card together with cash or credit card in order to balance their expanse. Meanwhile, if customers lose their gift cards, they don’t need to worry because they can register their cards online so as to track and froze the balance left in their card.

Different types of gift card

There are two major types of gift card: closed loop gift card and open loop gift card.

  • Closed loop gift card

Closed loop gift cards are popular for wedding, baby registries and shopping bonus. If a customer holds a closed loop gist card, it means that they can only purchase goods from a particular retailer, both at store or online. If the company has more than one retailer, customers may be allowed to purchases from any one of them. Closed loop gift card is like an advertisement for the store, thus customer don’t have to pay any activation fees and there is no processor’s logo.

Note that closed loop gift card is not reloadable, which means that if customers have already spent all the money, they can no longer use the card. However, they should not hesitate to spend the money either since closed loop gift cards usually have an expiration date, and they need to use the card before.

  • Open loop gift card

Open loop gift card is just like cash or credit card. Several major credit card issuers including MasterCard and American Express give out open loop gift cards. It can be used at more than one shop both at the store and online. Process’s logo will be put on the card and holders need to pay a $5 activation fee when they purchase the card. If holders have spent all the money, they can always choose to reload the card on their own.

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