Are you trying to choose between open loop vs closed loop gift cards? These types of rewards are a powerful tool for businesses, but there’s more nuance to them than meets the eye.
Tl;dr: Open loop cards offer incredible flexibility, allowing recipients to spend their rewards almost anywhere. Closed loop cards are gift cards tied to specific retailers, offering a more controlled spending experience. Both are important offerings from any gift card provider, for different reasons.
In this article, we'll explore the key differences between open loop and closed loop systems, along with advice on how and when to use these different types of gift cards.
Let’s start with some gift card basics. There are two main types of bulk digital reward cards you can offer recipients: open loop and closed loop.
Open loop cards, like prepaid Visa® and Mastercard®, are incredibly versatile digital rewards. They can be used where Visa and Mastercard is accepted, whether in-store or online, making them ideal for general rewards and incentives. Some open loop cards, like the Giftbit Virtual Prepaid Mastercard, can even be used internationally, making them great options for global rewards programs.
Overall, these cards give recipients the freedom to choose how and where to spend their funds, offering a level of flexibility that’s hard to beat.
They’re also popular options for programs that want to encourage recipients to ‘shop local’ at smaller establishments.
Now for a few more basics. It’s also easy to mix up prepaid cards and gift cards, but they’re not the same, and understanding the difference is key to choosing the right option for your program.
Gift cards are one-time load cards tied to specific retailers like Starbucks or Amazon. Simply put, if someone receives a Starbucks gift card, they can only use it at Starbucks.
Meanwhile, like we’ve covered, prepaid cards are much more flexible. They’re backed by networks like Visa or Mastercard, and they can be preloaded with a set balance. They’re popular because they don’t affect the cardholders’s credit and offer broad spending power. For this reason, they make great rewards as well as great digital payouts.
Bottom line, gift cards are ideal for brand-specific rewards, while prepaid cards provide the freedom to spend almost anywhere. We’ll provide some examples of when to use each type of card in your employee engagement and customer loyalty programs further below.
Setting up an open loop card prepaid program is straightforward when you have the right tools.
First, you’ll need to partner with a gift card platform that offers a wide range of prepaid card options, like Visa or Mastercard. The provider should allow you to easily order, distribute, and track these cards in a variety of formats.
Next, consider your customization options. Personalized messages will make your rewards more meaningful—and therefore more impactful, too.