Not all gift cards are the same. The type of card you have determines where you can use it, what fees may apply, and which regulations govern it.
Open-loop cards carry a Visa, Mastercard, American Express, or Discover logo. They work anywhere those payment networks are accepted, which is most merchants in the US and many internationally.
These cards are issued by banks and processed through major payment networks. When you use one, the transaction goes through the same infrastructure as a regular debit card. The card has a fixed dollar amount loaded at purchase.
Open-loop prepaid gift cards are regulated by the Consumer Financial Protection Bureau (CFPB) under both the CARD Act and the Electronic Fund Transfer Act. They receive strong federal consumer protections.
Closed-loop cards are issued by a specific retailer, restaurant, or service provider. They can only be used at that merchant's locations or website. These are the most common type of gift card in the US.
The card's value is stored in the retailer's own system. When used, the merchant deducts the amount from the card's balance internally. No payment network is involved, which keeps costs lower for the retailer.
Closed-loop retail gift cards are covered by the gift card provisions of the CARD Act. The Federal Trade Commission (FTC) also has oversight authority over unfair or deceptive practices by retailers.
Virtual gift cards exist only as a code, email, or digital file. They're increasingly common because they can be delivered instantly and don't require physical production or shipping.
From a regulatory standpoint, virtual gift cards receive the same protections as physical cards under the CARD Act. The five-year fund validity rule and inactivity fee restrictions apply equally.
One practical difference: there's no physical card to lose. But you can still lose access to the code if you delete the email or the issuing platform goes out of business. Keep records of virtual card codes in a safe place.
| Feature | Open-Loop | Closed-Loop | Virtual |
|---|---|---|---|
| Where usable | Anywhere network accepted | Specific retailer only | Online or in-app |
| Purchase fee | Usually yes ($3-$7) | Usually no | Varies |
| Inactivity fee | After 12 months | After 12 months | After 12 months |
| Fund expiry minimum | 5 years (CARD Act) | 5 years (CARD Act) | 5 years (CARD Act) |
| Physical card | Yes | Yes | No |
| Replacement if lost | Possible with receipt | Varies by retailer | Check email records |
Online redemption has its own set of quirks and common issues. We cover them in detail.
