Credit Card Glossary: Terms and Definitions

Gift card

A gift card is a type of stored-value payment card commonly issued by retailers and banks. Gift cards are preloaded with a set value. There are two major types of gift cards — those that can be used only at one store chain or one location (closed loop) and those that can be used anywhere (open loop). The closed loop variety of gift cards generally carry no fees or expiration date — the issuing store makes its money off the profit from selling merchandise. The open loop cards always carry fees; because they are issued by banks or credit card transaction processors, such as Visa or MasterCard, fees are the only way they can profitably issue gift cards.