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Open Loop Card

Reviewed by Bhavana | Updated on Sep 30, 2020

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What is an Open Loop Card?

An open-loop card is a charge card for general purposes that can be utilised wherever that brand card is accepted. It usually bears the logo of the brand or network that processes the actual transactions, such as MasterCard, Visa, or American Express. When the cards are offered via financial institutions, such as Visa or MasterCard, the name of the issuing bank or credit union is also often shown.

Which Cards Can Be Considered As Open Loop Cards?

Credit cards, debit cards, prepaid cards, or gift cards can be considered as open loop cards. The partnerships involved in issuing open-loop cards can be structured in many different ways. A closed-loop card is the opposite of an open-loop card, which can only be utilised to make purchases via a single firm or shop, such as a department store.

Any charge card is widely accepted as an open-loop card at a variety of merchants and locations. Open-loop cards can take a range of different forms. A credit card is mostly an open-loop card: a piece of plastic provided by their bank, credit union, or financial services firm that they can use to buy goods or services in a variety of places—both in-person and online.

The cardholder receives a statement every month for that time with his charges, which he can pay off in full or in part. This sort of card is issued by a financial institution in conjunction with the payment network (Visa or MasterCard) of that institution to customers.

Although they may have their own exclusive cards, many merchants, such as Amazon, team up with a bank as well as a network processor to sell open-loop credit cards. Identified as co-branded cards, they bear both the retailer's and the card company's logos. Such cards offer the best deals of both worlds: they can be used anywhere. When used in the specified store, the cardholders can collect reward points and gain advantages and benefits, such as free delivery or special days of sale. Such co-branded cards have annual fees, however, unlike proprietary store cards.

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