Companies purchasing gift cards for recognition, loyalty,
and goal achievement often debate the advantages of purchasing and awarding open loop cards vs. closed loop gift cards.
Open loop payment cards are prepaid cards carrying the
MasterCard, American Express, Discover, or Visa logo. These cards may be used
like cash wherever credit cards are accepted.
At first glance, it appears that open loop cards are the
best solution as they offer the widest range of purchasing options. But before you make that decision, consider
these open loop attributes:
n Often
impose a per card fee above the face value – can be as much as $5.95 per card;
n Often
expire and/or decline in value after 6 or 12 months if full balance is not used;
n Often
impose fees when the card is swiped, when you check your balance via customer
service, and other situations included in the “fine print” on the card;
n Often
result in a decline at the merchant location if cardholder does not know the
exact balance and the merchant cannot tell the cardholder how much remains on
the card;
n Can
be confusing at checkout if the cardholder wants to use an additional method of
payment for any outstanding balance on his/her purchase (i.e. a “split tender”
transaction).
Closed loop merchant cards, while restricting the cardholder to a speciic merchant, have no declining values and rarely impose expiration dates. In addition, the merchant can "read" the card and tell the cardholder the exact balance that remains. The user experience is usually much smoother with closed loop cards than with open loop.
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