Open Loop Card

What is an Open Loop Card?

An open loop card is a broadly useful charge card that can be utilized anyplace that brand of card is accepted. It for the most part bears the logo of the card brand or network (which processes the actual transactions), like Visa, MasterCard, American Express, or Discover. On account of cards offered through financial institutions, similar to Visas or MasterCards, it frequently shows the name of the responsible bank or credit union also.

Open loop cards can be credit cards, debit cards, gift cards, or prepaid cards. The partnerships associated with the issuance of open loop cards can be structured in different ways.

Something contrary to an open loop card is a closed loop card, which must be utilized to make purchases from a single company or retailer, similar to a department store.

The Basics of an Open Loop Card

Any charge card that is widely accepted at different merchants and areas is considered an open loop card. Open loop cards can take various forms.

Credit Cards

Open loop cards are a great many people's thought process of when they think of credit cards: a piece of plastic, issued by their bank, credit union or financial services company, that they can use to purchase goods or services at various spots, both in person and on-line. Consistently, the cardholder receives a statement with his charges for that period, which he can pay off in full or in part.

This kind of card is issued to customers by a financial institution in partnership with that institution's processing network (Visa or MasterCard). American Express and Discover act as both their own responsible bank and network processor.

Debit Cards

The debit card tied to your checking account, which deducts funds from it quickly when you make a purchase, is likewise an open loop card. Like credit cards, debit cards work in partnership with a network processor and incorporate its branded logo. Debit cards can be utilized anyplace that their processing network is accepted.

Gift Cards and Prepaid Cards

Prepaid cards stacked with funds for sometime later can be open loop cards too. General prepaid cards are reloadable and can be consistently utilized for payments and recurring billing. Gift cards, generally defined as cards that can typically just be utilized until the stacked funds have been depleted, are open loop on the off chance that they are not specific to a certain store.

A few prepaid cards may likewise be utilized for public assistance benefits. For instance, certain prepaid assistance cards could permit qualifying people to purchase food at any supermarket that acknowledges Visa. Flexible spending account cards are likewise a type of open loop prepaid card, which can be utilized to make qualifying medical services purchases from any merchant that acknowledges the branded processor.

There are likewise open loop payment cards that can be utilized as payroll cards to pay workers who don't have bank accounts, can't receive direct deposits, and would need to pay a fee to cash a check. Employers partner with payroll card issuers to give this card as a benefit for their employees. A portion of these cards come with various fees, however workers can utilize them anyplace that the network brand is accepted.

2%

Annual growth rate of open loop pre-loaded cards through 2023 (source: Mercator Advisory Group forecast).

Co-Branded Cards

Despite the fact that they might have their own proprietary cards, numerous retailers are additionally team up with a bank and a credit card network processor to offer open loop credit cards, similar to an Amazon Visa or a SaksFirst MasterCard. Known as co-branded cards, since they bear both the logos of the retailer and the card company, these cards offer the best of the two universes, as it were: They can be utilized anyplace, yet when utilized in the store, let cardholders accrue rewards points and get advantages and privileges, as free delivery or special sale days. Not at all like proprietary store cards, in any case, these co-branded cards generally have annual fees.

Features

• An open loop card is a broadly useful charge card that can be utilized anyplace that brand of card is accepted.
• Something contrary to an open loop card is a card that must be utilized at a specific retailer, known as a closed loop card.
• Open loop cards can be credit cards, debit cards, gift cards, or prepaid cards.