There are basically two types of prepaid cards: closed loop and open loop. Closed loop prepaid cards are merchant specific and can be used only in a single store or group of stores. Consequently, merchants often sell or give them to customers as gift or loyalty cards. Open loop prepaid cards are issued by banks and credit card companies and are more versatile than closed loop cards because they are network branded with one of the major credit card logos (Visa®, MasterCard®, American Express® or Discover®) and can be used wherever they accept credit cards.
Additionally, open loop prepaid cards are reloadable and can be used for bank-related activities like ATM cash withdrawals. For many people, open loop cards are an attractive and convenient alternative to closed loop gift cards and to carrying large sums of cash.
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