Are Visa gift cards open-loop or closed-loop?

Visa gift cards are open-loop. They carry the Visa logo and can be used almost anywhere Visa is accepted, so they're not restricted to a single retailer. It's worth noting the difference between a Visa gift card and a Visa credit card. Both are open-loop and run on the same payment network, but they work differently. A Visa gift card is prepaid and loaded with a fixed balance. A Visa credit card is a revolving line of credit, meaning you borrow and repay over time.

Do open-loop gift cards expire?

Yes, most open-loop gift cards have expiration dates, typically 12 to 24 months from purchase or last use. Some charge inactivity fees after a period of non-use. Closed-loop gift cards are subject to fewer restrictions under U.S. federal law. Under the CARD Act, gift cards can’t expire until at least five years from the activation date. That said, terms vary by card and issuer, so it's worth reviewing the specifics before distributing at scale.

Are closed-loop gift cards taxable for recipients?

It depends. In the U.S., employer-provided gift cards are generally treated as taxable income. Research incentives may be treated differently depending on the program structure and reward amount. Tax treatment also varies by jurisdiction and the relationship between sender and recipient. Disclaimer: Tremendous can't provide tax or legal advice. While we've covered the basics of closed-loop gift card tax considerations here, you should run everything past your company's tax advisors to be sure you’re running reward programs in a way that’s fully compliant and optimized for your situation.

Can closed-loop gift cards be used internationally?

Generally, no. Closed-loop gift cards are typically valid only at the issuing retailer's locations in the country of purchase. A U.S. Walmart gift card, for example, can't be used at a Walmart location in another country.

What is an open-loop credit card?

An open-loop credit card is a standard credit card that can be used anywhere the payment network is accepted, rather than being tied to a specific retailer. Think Visa, Mastercard, American Express, and Discover. The distinction matters because not all credit cards work this way. Some store-branded cards, such as the Target Circle Card, are closed-loop. You can only use it at Target. Open-loop credit cards and open-loop gift cards share the same network-based acceptance, but they work a little differently. A credit card gives you a revolving line of credit that you borrow against and repay over time. A gift card is prepaid, so you only spend what's loaded on it. For example, a United Airlines open-loop Visa credit card can be used almost anywhere Visa is accepted and carries a revolving credit line. A United Airlines closed-loop gift card comes preloaded with a fixed amount and can only be used for United Airlines purchases.

Closed-loop vs. open-loop gift cards: Everything you need to know

By Izabelle Hundrev●5 min. read●May 20, 2026

Gift cards and payouts

Gift cards are one of the most popular reward options for teams, but not all gift cards work the same way.

There are two primary types: open-loop and closed-loop gift cards. They come with different constraints, fees, and tradeoffs that can meaningfully impact your incentive program and your recipients' experience.

This guide covers how each type works, when they’re most effective, and how to decide which option fits your rewards strategy best.

What is an open-loop gift card?

An open-loop gift card is a prepaid card that works like cash. Unlike store-specific gift cards, open-loop cards aren’t tied to a single retailer: they carry a major payment network logo such as Visa, Mastercard, or American Express. This means recipients can use them almost anywhere those networks are accepted, both online and in-store.

You might hear open-loop gift cards compared to open-loop credit cards since both run on the same payment networks. The key difference is that gift cards are prepaid, meaning there's no credit line, no interest charges, and no credit check involved.

What is a closed-loop gift card?

A closed-loop gift card is a prepaid card that can only be used at the issuing merchant or merchant brand family. Unlike open-loop cards, they typically carry the retailer's logo and can't be used outside that retailer or its network. Some of the most popular closed-loop cards include Amazon.com, Walmart, and Target.

Certain cards extend across a group of related brands. For example, a Gap gift card can also be used at Old Navy and Banana Republic, giving recipients more purchasing flexibility while still staying within the same brand family.

Open-loop vs. closed-loop gift cards: Pros, cons, and use cases

Neither option is universally better. The right choice depends on your goals, budget, and how well you know your recipients.

Feature	Open-loop gift cards	Closed-loop gift cards
Acceptance	Typically, anywhere the network is accepted, with constraints	Only at the issuing retailer
Available formats	Physical, virtual, digital wallet	Physical, virtual (varies by retailer)
Network	Visa, Mastercard, AmEx	Proprietary merchant system
Fees	Activation and inactivity fees common	Rarely have fees
Best for	Flexibility, cash-like rewards	Brand loyalty, targeted gifting

The pros and cons of open-loop gift cards

Best for: Programs with diverse or unknown recipient preferences that would benefit from maximum flexibility. Additionally, any program where recipients are spread across multiple countries or regions.

One of the biggest advantages of open-loop cards is flexibility. Recipients can spend them almost anywhere the network is accepted, including across country borders. This makes them a strong fit if your recipient base is global or geographically dispersed. They also tend to feel more like cash, which can increase the appeal for some recipients.

That flexibility comes with tradeoffs, though. Activation fees are charged to the sender and can run from $3 to $6 per card, which adds up fast. For example, a program sending 10,000 cards at $5 each adds $50,000 in administration costs.

Inactivity fees are another factor. If a recipient doesn't use the card within a certain period (typically 12 months), they’re typically charged a monthly inactivity fee, which can leave a bad impression of your program.

Open-loop cards can also feel less personal than a retailer-specific card, which may reduce the emotional impact of the reward. And while acceptance is broad, it's not universal. Some cards block certain purchase categories, such as gambling or crypto, and others are restricted to U.S. transactions only.

The pros and cons of closed-loop gift cards

Best for: A recipient base that has known brand preferences (for example, a sales team that loves Dunkin' coffee) and budget-conscious programs where avoiding activation fees matters.

Closed-loop gift cards tend to be more cost-efficient. Most don’t charge activation or inactivity fees, making them easier to budget for at scale. Because they’re tied to specific retailers, they can also feel more personal and intentional, especially if the recipient already has a positive association with that brand.

The tradeoff is relevance. If a recipient doesn’t shop at that retailer, the card goes unused or re-gifted. This leads to wasted budget and a poor overall experience for the recipient.

Additionally, most closed-loop cards are limited to specific regions or markets, so they’re harder to scale for global incentive programs without a platform that offers a broad international reward catalog.

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How to choose the right card type for your rewards program

A few questions can help you narrow down the right option for your program.

Does your reward program tie to a specific theme or initiative? Closed-loop gift cards work well when rewards reinforce a specific theme or experience. For example, a wellness program that rewards healthy habits with a Peloton gift card, or a peer mentorship program that sends Starbucks cards to encourage coffee chats. In these cases, the gift card and brand reinforce what the program celebrates.
Who are your recipients? If you know your audience well and they share common interests or brand preferences, a closed-loop card can feel more thoughtful and curated. If your recipient base is diverse or their preferences are unknown, open-loop is the safer default.
Where are they located? Closed-loop gift cards are tied to specific retailers that may not exist or be popular in every region. Open-loop gift cards are often the better choice for multi-country international programs, since they function like cash and are more widely accepted.
What’s your budget? Open-loop gift cards often include activation fees, which can add up quickly at high volumes. Closed-loop gift cards rarely charge fees, making them the more cost-efficient option.

When to offer both

For many programs, the most effective strategy isn’t deciding between open- and closed-loop gift cards. It’s giving recipients the ability to choose for themselves. When people can select their own reward, the experience feels personal even at scale, which can boost overall satisfaction.

When you’re running a program with thousands of recipients, manually catering to individual preferences isn’t realistic. Offering both card types solves that problem without adding complexity to your operations.

Giving recipients a choice also helps offset the main downsides of each option. Open-loop gift cards can feel generic, but that changes when a recipient actively selects one. Closed-loop gift cards can go unused if the brand isn’t relevant, but that risk disappears when recipients choose the retailer themselves.

To make this work in practice, look for an incentive platform that supports both open- and closed-loop cards and lets recipients choose at the point of redemption. This makes it easy to deliver a flexible, personalized experience without added manual work.

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