Open-Loop Card

Open-loop card summary: 

• An open-loop card can be a debit, credit, or prepaid card. 

• The card will have the logo of a major card issuer, like Visa, so you can use it anywhere that type of card is accepted. 

• Open-loop cards often come with more fees to make up for the cost of processing payments across a wide variety of merchants. 

Open-loop card definition and meaning 

Take a look at your credit or debit card. Chances are your card has the name of the bank you got it from, along with the logo of a major credit card brand that issues cards and maintains payment processing networks for purchases. The largest ones are Visa and Mastercard, followed by American Express and Discover. 

Key concept: Open-loop cards don’t restrict where you can use the card to access your checking account balance, credit card limit, or prepaid card balance to just one store or family of stores. 

More on open-loop cards

Most traditional credit cards are open-loop, meaning you can use them to pay for purchases anywhere that card brand is accepted. In the case of Visa and Mastercard, that might be almost anywhere on the planet. In exchange for this wide acceptance, you might pay higher or more fees for the card. 

Open-loop cards: a comprehensive breakdown 

Many other payment cards use the open-loop model.  

Debit cards

Opening a checking account often gives you access to a debit card. These cards closely resemble credit cards, but instead of access to a line of credit, they tap into your bank account balance to pay for purchases. You could use an open-loop debit card to

• Withdraw money from an ATM

• Show you’re an accountholder when you make transactions at your bank

• Make purchases online and in-store  

Credit cards

Most, but not all credit cards, are open-loop cards. For example, store credit cards can usually only be used for purchases at that particular store. Many major store chains (including Costco and Best Buy) now offer open-loop cards, and you can use these cards elsewhere, too. An open-loop store card might let you earn rewards on both store-specific and everyday purchases.

If you open a credit card through your bank or through a major card issuer (such as American Express or Discover) directly, the card will be open-loop and you’ll be able to use it at brick-and-mortar and online merchants that accept the card’s brand. 

Prepaid and gift cards

Prepaid cards can be a good way to manage your money if you don’t qualify for a credit card or struggle with overspending. Once you spend down the balance of the card, you’ll have to reload it by adding more money. Prepaid cards look just like credit or debit cards. They carry the major card issuer logo, which shows they’re open-loop cards. 

General-purpose gift cards often have the Visa or Mastercard logo, and you can use them at any retailer that accepts Visa or Mastercard.