Businesses use Visa and Mastercard prepaid gift cards mainly for incentives, rewards and one-off payments where the recipient should be able to spend anywhere. The cards are issued by banks or licensed e-money institutions under a network brand, not by the network itself, so the fees, activation steps and limits come from the issuer’s programme. Because the cards behave like money, identity checks and value limits apply that closed-loop gift cards usually avoid.
Where open loop sits against brand-specific cards is covered in closed-loop vs open-loop gift cards. This article is about the practical side: how a business actually buys, issues and manages network-branded cards.
Who you are actually buying from
A network-branded gift card has several parties behind it. The card network provides acceptance. A bank or e-money institution issues the card and holds the funds. A programme manager often designs the product, runs the platform and sells to businesses. Visa’s own prepaid pages state that its prepaid cards are issued by financial institutions and that fees vary by issuer.
For a business buyer this means the contract that matters is with the issuer or programme manager, and every rule about fees, expiry, replacement and limits is in their cardholder terms. The network brand tells you where the card is accepted. It tells you little about the product.
Typical business uses
| Use | Why open loop | What to watch |
|---|---|---|
| Employee incentives and recognition | Recipient spends anywhere, no brand choice needed | Tax treatment of staff rewards varies by country |
| Customer rebates and promotions | Feels close to cash, simple to explain | Promotional cards often carry different fee and expiry terms |
| Research and survey payments | Works for recipients of any background | Identity rules may apply above set values |
| One-off disbursements | Avoids collecting bank details | Some recipients struggle with online use and holds |
Where recipients are happy to choose a brand, a choice catalogue of closed-loop cards often does the same job with fewer fees and fewer rules; the trade-offs are in choice vs single-brand rewards.
Activation and delivery
Cards come in physical and virtual form. Whether a card is active on arrival or needs activation by phone or online depends on the issuer, and Visa’s US gift card page (visa.com/en-us/personal/cards/gift/gift-card-balance) reminds cardholders to make sure a card is activated before using it. Virtual cards are delivered as a card number, expiry date and security code, often through a link to the issuer’s portal.
For an incentive programme, plan the recipient’s first five minutes:
- Is the card active on arrival, or does the recipient need to activate it?
- Does it need registering with a name and address before online use?
- Where does the recipient check the balance?
- Who handles a lost card, and is replacement possible only after registration?
- Is the card valid abroad, or domestic only?
Visa’s US gift card page notes that registering a card is a good idea because some issuers replace a lost card only if it was registered, and that a card marked “Valid only in the United States” will not be accepted abroad. Both details should appear in your covering message.
Fees
Open-loop cards carry fees in a way closed-loop gift cards usually do not, because the issuer pays network and banking costs. They can include a purchase or activation fee charged to the business per card, and in some programmes fees charged to the cardholder later. Every amount comes from the issuer’s schedule, so compare programmes on the full fee list rather than the headline.
Consumer protection rules limit some of these fees in some countries. In the United States, for example, the Consumer Financial Protection Bureau’s gift card rule (Regulation E, section 1005.20) says funds on a general-use prepaid card must remain valid for at least five years, and that dormancy or inactivity fees can be charged only after a year without activity, at most once a month, and only if disclosed. The same rule excludes cards issued for loyalty, award or promotional purposes from most of these protections, provided the card says so on its front and discloses its expiry date and fees.
That exclusion matters to businesses. A card given as a reward may be a promotional card under the rule, with shorter expiry or different fees than a card a consumer buys at a till. Recipients rarely know this, so tell them.
How the cards behave in use
Network-branded gift cards work where the network is accepted, but a few behaviours catch recipients out. Per Visa’s US gift card page (visa.com/en-us/personal/cards/gift/gift-card-balance):
- Holds. Hotels and car rental companies often place a hold on the card, and for tipping the merchant or issuer may authorise more than the bill, so a card can decline even when the bill is lower than the balance.
- Fuel. Pay-at-pump can decline a gift card; paying inside usually works.
- No reloading. A Visa gift card cannot be reloaded with more funds.
- Online use. The card number, expiry date and security code are entered at checkout like any other card.
Some merchants support partial authorisation, where the card pays what it holds and the rest goes on another payment method, but that depends on the merchant. A short note on split payments saves a lot of support time.
Identity checks and value limits
Because open-loop cards can be spent like money, anti-money-laundering rules apply to them. The details vary by country and change over time, so treat this as orientation, not advice.
In the European Union, Directive (EU) 2018/843 (the fifth anti-money-laundering directive) narrowed the room for anonymous prepaid cards. Member states may exempt a card from customer identification only under strict conditions, including a maximum stored value of EUR 150 on a card that is either non-reloadable or capped at EUR 150 of monthly payments usable only in that member state. The exemption does not apply to cash redemption or withdrawal above EUR 50, or to remote payments above EUR 50 per transaction. Above those lines, the issuer must identify the cardholder. EU anti-money-laundering rules are being reorganised, so check the current position with your issuer.
Other jurisdictions set their own thresholds and reporting duties. In practice the issuer applies these rules, and they reach a business buyer in three ways:
- Know-your-business checks on the buyer before a programme starts, similar to the KYB checks for bulk code buyers;
- Value caps per card and per recipient, set by the issuer to stay within its permissions;
- Recipient identification for higher-value or reloadable cards, which changes how the card reaches the recipient.
Selling open-loop cards on to the public is a different matter again. In many countries it brings a business close to payment regulation, and it should not start without legal advice for each market.
Cross-border programmes
International programmes face a second layer. Many gift cards work only in the country of issue, currency conversion adds fees, and identity rules differ by country. A programme with recipients in many countries often needs one issuer per region, or a closed-loop catalogue chosen per country. The common mistakes are covered in international gift card rewards pitfalls, and the wider set of prepaid products for financial services firms is in prepaid products for fintechs.
Where a distributor fits
Distributors of digital codes deal mostly in closed-loop products; open-loop cards normally come from an issuer or programme manager under its own contract. Many programmes combine the two: a network card for recipients who want cash-like value, and brand cards for recipients who prefer a specific store or platform. Giftoro is a B2B distributor across 100+ brands with API and bulk file delivery; the distributor page explains how onboarding works for the closed-loop side.
Frequently asked questions
Who issues Visa and Mastercard gift cards?
Banks and licensed e-money institutions, not the card networks. The network provides acceptance and the brand, while the issuer holds the funds and sets the fees, expiry and cardholder terms. Visa’s own prepaid pages state that its prepaid cards are issued by financial institutions and that fees vary by issuer. A business buys through an issuer or a programme manager working with one.
Do Visa gift cards need to be activated?
It depends on the issuer, and Visa’s US gift card page reminds cardholders to make sure a card is activated before use. Visa also recommends registering the card, because some issuers replace a lost card only if it was registered. Tell recipients of incentive cards which applies before they try to use them.
What fees do open-loop prepaid cards carry?
It depends on the issuer. Fees can include a purchase or activation fee per card, paid by the buyer, and in some programmes later fees charged to the cardholder. In the United States, Regulation E limits inactivity fees to after a year without use and requires funds to last at least five years, but cards issued for promotional or award purposes are largely excluded if they disclose their terms.
Is identity verification required for prepaid gift cards?
Often, above certain values. Anti-money-laundering rules let issuers skip customer identification only for low-value cards. In the EU, Directive 2018/843 limits the exemption to cards holding at most EUR 150 that are either non-reloadable or capped at EUR 150 of monthly payments usable only in that member state, and excludes remote payments and cash redemption above EUR 50. Issuers apply these rules through checks on the business buyer, value caps per card and identification of recipients.
Can I use Visa or Mastercard gift cards for employees abroad?
Check each card’s terms first. Visa’s US gift card page notes that a card marked “Valid only in the United States” is a domestic-use card and will not be accepted abroad, and currency conversion can add fees where cards do work internationally. For staff in several countries, a programme often needs an issuer per region or a choice of local closed-loop brands instead.