“Open-loop” is a term commonly used in the gift card industry. As opposed to “closed-loop” gift cards that are issued by merchants such as Amazon, Target, and others, “open-loop” cards are issued by banks and credit card companies such as MasterCard, American Express, and VISA. Unlike closed-loop cards, open-loop cards can be used just about anywhere that credit and debit cards are accepted, offering great flexibility for users.
Open-loop cards are a relatively recent innovation, and they’ve been growing in popularity in recent years. Many people are now giving these cards as an alternative to cash gifts, because they offer flexibility, but a slightly more personal touch than a gift of cash. Many companies have also begun using open-loop cards as an alternative to rebate checks, as they offer a more cost-effective method of providing a cash-like reward to customers.
Open-loop cards are also more useful than a cash gift, because they can be spent at places where cash isn’t usually accepted – online stores being the prime example.
However, open-loop cards aren’t perfect. It can often cost a bit of cash to activate a card, and monthly fees for VISA and MasterCard gift cards are fairly common. In addition, there are some particularities to using these gift cards that can be very hard to understand.
If you’ve used an open-loop gift card in the past, you’ve probably dealt with some of these frustrations – you’re at a store trying to spend the value of your card, but it’s just not working, no matter what you try.
So to help you use your open-loop prepaid gift cards more effectively, EJ Gift Cards has put together this article. We’ll go over some of the most common scenarios where your open-loop card may not work, and discuss solutions to deal with each individual scenario. Let’s dive in!
1. Your Gift Card Hasn’t Been Activated
This is one of the most common issues we encounter among users of open-loop gift cards. Activating one of these gift cards is usually a bit more tricky than a standard closed-loop card.
While most closed-loop cards are activated as soon as they’re purchased at the register, many prepaid open-loop cards require additional activation steps. If you haven’t activated your card, it’s not going to work – whether online or in-person.
This was a bigger problem in the past, when open-loop cards were still a novelty. Today, most open-loop cards purchased at stores are activated as soon as the purchase is made, making things much easier for gift-givers and recipients alike.
However, this is not the case for gift cards that you purchase online, or that you get as a rebate or reward through the mail. To protect you and the value of your card, most issuers will require you to take additional steps to claim the balance of the card and activate it.
So, as a rule, you don’t have to worry about additional activation steps if you purchase a gift card in person – but if you buy one online, make sure you read the terms and conditions, and take appropriate measures to activate the card’s balance.
2. Your Gift Card Doesn’t Run Correctly At The Store
Open-loop prepaid gift cards can be a bit confusing to use at a store. Technically, these cards are debit cards, not credit cards. They’re associated with a set balance that’s kept in a specialized account, and as you use that balance, the money is spent – just like a debit card. For most of these cards, you’ll also be issued a PIN that you can use when spending the balance of the card at a store.
However, prepaid open-loop gift cards can’t be used for cash withdrawals, or any other standard function of a debit card, despite the fact that they have a PIN. In addition, many of these cards can be run as a “credit” transaction, which doesn’t require you to enter a PIN at all.
All of this can add up to quite a bit of confusion. To understand how your card should be run, you should read the terms and conditions of the card.
If you’re still not sure, just let the cashier know that you’re using a prepaid gift card for your purchase – they’re sure to know how to run the transaction.
3. You Can’t Purchase An Item Because Your Balance Is Too Low
Unlike traditional debit and credit cards, prepaid gift cards can’t be overdrawn. If you try to make a purchase that’s higher than the value of the gift card, the transaction will be automatically rejected, and your card will be declined – even if it’s still valid, and has a balance remaining.
To avoid this issue, you should try to keep track of the balance left on your card. Use a Sharpie to write down the remaining balance on your card after every transaction – then you’ll never be unsure about whether or not you have a large enough balance to make a purchase.
If your card only has a small balance left, don’t worry – you can still use it. You just have to inform your cashier that you want to split your transaction between two forms of payment. This way, they can run the gift card for whatever balance is remaining, and you can pay the rest of the remaining transaction price with cash or a credit card.
4. Gas Stations Reject Your Gift Card
Gas stations can be a bit tricky if you’re trying to pay using an open-loop gift card. The problem is that the total price of your transaction is unknown. You could just be topping off your tank for $5, or you could be filling up a gigantic gas tank on a truck, and spending nearly $100.
Because of this, most self-serve gas station terminals attempt to place a “hold” on credit and debit cards run, usually for $70 or more. By doing this, the terminal can ensure that there are adequate funds in an account, and that even a large gas purchase will go through without an issue.
This can be a problem when you’re using a prepaid card. If your remaining balance is too low, your transaction could be rejected – even if you have a high enough balance to cover a full tank of gas.
In this case, the solution is pretty simple – don’t use the self-service terminals! At just about every gas station, you can pay inside. Go on in, hand over your gift card, and prepay for your gas. This may be a bit less convenient than self-service, but it’s worth being able to spend the value of your card.
5. Hotels Won’t Accept Your Gift Card
While it is possible to pay for a hotel stay with an open-loop gift card, you may have to jump through a few hoops. Most hotels require a credit card during the check-in process. This allows them to cover incidentals such as minibar purchases, room service, or other items charged to your room. Usually, hotels will place a hold on your credit card for the cost of your stay, plus about 30% to cover any of these “incidentals” you may make use of.
Having your credit card on file ensures that they are able to charge you in case you damage your room, or have to pay additional charges for cleaning or other services, should you mistreat the room during your stay.
Because of this, hotels are somewhat reticent to accept prepaid gift cards when you’re booking a room, so you’ll need a legitimate credit card in order to get a room.
However, you don’t have to pay with this card. Simply inform the hotel front desk worker that you’ll be paying with a different card, and that they shouldn’t charge the card that you made your reservation with. Then, just pay the final bill with your gift card when you check out – it’s just that easy.
6. Car Rental Agencies Don’t Accept Your Gift Card
Car rental agencies function similarly to hotels – they almost invariably require a legitimate credit or debit card in order to make a reservation, and they’ll place a hold on the card in the amount of the expected transaction to ensure that you have enough money to pay for the car rental. They also want to have your information on file in case you’re liable for additional charges like car pickup, damage, or additional cleaning fees.
However, these agencies are flexible. When making your car rental reservation, simply give the worker your credit card information so that you can ensure you get a car, then inform the worker that you’re going to pay the final bill with a different card. This is usually just fine with car rental agencies – if your gift card doesn’t work, they’ll simply charge the card that you made the reservation with.
7. Your Gift Card Isn’t Working For Online Purchases
One of the biggest benefits of open-loop gift cards is that they can be used for online purchases. Indeed, many people who don’t have debit cards or credit cards like to purchase VISA and MasterCard gift cards with cash, thereby allowing them to purchase items online.
However, many online merchants use fraud-screening programs that can cause your gift card to be declined when making an online purchase. These fraud-screening programs usually cross-check the billing address and information given at checkout with the information registered to the card. If your open-loop prepaid card isn’t registered to your address, the transaction may fail.
This is easy to fix. Simply take a look at the back of the gift card, and find the customer service hotline, or the website of the issuing company. You should be able to register your card to your address by talking to a customer service representative, or by using an online form. Once you do so, you’ll have no trouble at all using your card online.
There is one other problem that you may run into when using your open-loop card for online purchases. If your gift card balance is too low to make a purchase, most retailers don’t offer any way to split your payments between multiple cards online. There’s simply no option to purchase items with multiple bank cards.
There’s no easy way to deal with this issue. If your card has a really low balance, you’re better off spending it in person. However, if you really need to use up the card online, you do have one option – purchase a gift card from that merchant, and use it to buy your items!
Most major retailers like Amazon will allow you to buy an “egift” card in just about any amount. You can simply purchase a gift card using the remaining balance on your open-loop card, and then apply that e-gift card to your other purchases! While this isn’t an ideal solution, it will allow you to spend your remaining balance online, so it’s certainly a viable way to go.
8. You’re Trying To Use Your Gift Card For Restricted Services
If you’re trying to use your open-loop gift card for certain services – including adult entertainment websites, gambling, PayPal, or money wire transfer services, it may be declined.
Policies vary on these services, but most open-loop cards can’t be used for these kinds of transactions. Consult the user agreement or terms and conditions of the issuing bank, and you’ll be able to see what kinds of restrictions apply to your gift card.
Got Gift Cards You Don’t Want? Sell Them At EJ Gift Cards!
Open-loop gift cards can’t be sold online, which is one of their drawbacks – but if you have any old gift cards from merchants like Amazon, Walmart, or hundreds of others, you can sell them for instant cash at EJ Gift Cards!
The process is totally simple. Just enter the details on your card, get an offer, and provide us with your payment information. As soon as you accept our offer, and we verify the details of your card, we’ll issue payments via PayPal.
There’s no risk and no catch – and if you have issues, our customer service team is happy to help you. So don’t wait! Turn your useless old gift cards into cash with EJ Gift Cards!
