Open Loop Card

Capital Markets

What is an open loop card?

An open loop card is a general purpose payment card that can be used wherever this brand of card is accepted. It usually carries the logo of the brand or the card network (which processes actual transactions), such as Visa, MasterCard, American Express or Discover. In the case of cards offered by financial institutions, such as visas or MasterCard, it often indicates the name of the issuing bank or the credit union.

Open loop cards can be credit cards, debit cards, gift cards, or prepaid cards. The partnerships involved in issuing open-loop cards can be structured in different ways.

The opposite of an open loop card is a closed loop card, which can only be used to make purchases from a single company or a single retailer, such as a department store.

The basics of an open loop map

Any payment card widely accepted at various merchants and locations is considered an open loop card. Open loop cards can take many forms.

Key points to remember

  • An open loop card is a general purpose payment card that can be used wherever this brand of card is accepted.
  • The opposite of an open loop card is a card that can only be used at a specific retailer, known as a closed loop card.
  • Open loop cards can be credit cards, debit cards, gift cards, or prepaid cards.

Credit card

Open loop cards are what most people think of when they think of credit cards: a piece of plastic, issued by their bank, credit union or financial services company, which they can use to buy goods or goods. services at various locations, both in person and online. Each month, the card holder receives a statement of their costs for this period, which they can reimburse in whole or in part.

This type of card is issued to customers by a financial institution in partnership with the processing network of this institution (Visa or MasterCard). American Express and Discover act both as their own issuing bank and their own network processor.

Debit cards

The debit card linked to your current account, which deducts funds from it immediately when you make a purchase, is also an open loop card. Like credit cards, debit cards work in partnership with a network processor and include its brand logo. Debit cards can be used wherever their processing network is accepted.

Gift cards and prepaid cards

Prepaid cards loaded with funds for future use can also be open loop cards. General prepaid cards are reloadable and can be used consistently for payments and recurring billing. Gift cards, generally defined as cards that can generally only be used until the funds loaded are used up, are open loop if they are not specific to a certain store.

Certain prepaid cards can also be used for public assistance services. For example, some prepaid support cards may allow eligible people to purchase food at any Visa-accepting grocery store. Flexible spending account cards are also a type of open-loop prepaid card, which can be used to make eligible health care purchases from any merchant that accepts the branded processor.

There are also open-loop payment cards that can be used as pay cards to pay workers who do not have a bank account, cannot receive direct deposits, and should pay a fee to cash a check. Employers are partnering with pay card issuers to offer this card as a benefit to their customers. Some of these cards are chargeable, but employees can use them wherever the network brand is accepted.


Annual growth rate of prepaid cards in open loop until 2020 (source: Mercator Advisory Group forecasts).

Co-branded cards

While they may have their own proprietary cards, many retailers also partner with a bank and a credit card network processor to offer open-loop credit cards, such as an Amazon Visa or Saks Fifth Avenue MasterCard . Known as co-branded cards because they carry both the retailer’s and the card company’s logos, these cards offer the best of both worlds, so to speak: they can be used anywhere, but when they are used in the store, let cardholders accumulate reward points and get benefits and privileges, like free delivery or special sales days. Unlike proprietary store cards, however, these co-branded cards have annual fees.

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