Gift Card

What Is A Gift Card?

A gift card, also known as a gift certificate in North America or a gift voucher or gift token in the United Kingdom, is a prepaid stored-value money card issued by a merchant or bank to be used as an alternative to cash for purchases at a specific business or affiliated firms.

Deeper Definition

Gift cards are prepaid debit cards that may be loaded with money and used in the future. Gift cards are classified into two types: open-loop cards and closed-loop cards, and both types are often used online and offline.

In some situations, they can be used to pay for a portion of a transaction, with cash, debit, or credit to balance the spending.

· Closed Loop Gift Cards

Stores frequently advertise closed-loop gift cards, which allow the cardholder to buy anything from that specific merchant. Closed-loop cards may often only be used with a single retailer, in-store or online. However, if a single corporation controls many outlets, it may offer gift cards that may be redeemed at any of them. Closed-loop gift cards often do not have any activation fees. These gift cards will likewise be devoid of the processor’s branding.

Closed-loop gift cards are often not reloadable; thus, they are rendered useless once the balance is depleted. The funds on a closed-loop gift card may also include an expiration date, requiring the user to utilize the card within a certain term.

· Open Loop Gift Cards

Open-loop cards are the cash equivalent – or, more precisely, credit or debit cards that may be used at any merchant that takes that card and online. These cards will include the payment processor’s logo and may be used to make nearly any type of electronic payment.

Open-loop gift cards also benefit from acting as a standard prepaid card. These cards are often reloadable, allowing the user to add money independently. Open-loop cards may need a $5 activation fee, which must be paid when the card is purchased.

Gift Card Example

Gap Inc. (GPS) gift cards are an example of closed-loop gift cards, while American Express, Visa, Discover, and MasterCard are examples of open-loop gift cards.