Gift Cards 2025: Prices, Types, and How to Avoid Scams

Julia Kagan is a financial and consumer journalist, formerly senior editor of personal finance at Investopedia.

What Exactly Is a Gift Card?

A gift card is a prepaid debit card loaded with a fixed amount of money, designed for future purchases. There are two main types: closed-loop cards, usable only at specific retailers, and open-loop cards, which function like prepaid credit cards accepted widely across many merchants and ATMs.

Key Points to Remember

• Gift cards are prepaid cards with a set balance for purchases or financial transactions.
• Closed-loop cards are limited to specific stores, whereas open-loop cards have broader acceptance.
• Some gift cards allow ATM withdrawals, primarily open-loop types.
• Closed-loop cards generally cannot be reloaded once spent.

How Do Gift Cards Function?

Gift cards act as prepaid debit cards loaded with funds for later use. Open-loop and closed-loop cards can both be used in-store and online. Loading limits typically range from $10 to $500. Partial payments combining gift cards with other payment methods are common. Many cards can be registered online to track balances and protect funds if lost, making them safer than cash.

Helpful Tip

Reload fees may apply depending on the card when adding funds.

Understanding Closed-Loop Gift Cards

Closed-loop gift cards are issued by specific retailers and can only be used for purchases at that merchant’s locations or websites. Some companies with multiple brands, like Gap Inc., allow their gift cards to be used across affiliated stores such as Gap, Banana Republic, Old Navy, and Athleta.

These cards usually have no activation fees and do not display payment processor logos, serving as store branding. They are typically non-reloadable and may expire after a set period. Closed-loop cards are popular for occasions like weddings and baby registries, often offered as bonuses for registry sign-ups.

Market Insight

The global gift card market is projected to grow at over 12% annually through 2031, according to Persistence Market Research.

Exploring Open-Loop Gift Cards

Open-loop gift cards operate like prepaid credit or debit cards and can be used at any merchant accepting their payment network, such as Visa, MasterCard, American Express, or Discover. These cards bear the payment processor’s logo and support electronic payments both online and offline.

Open-loop cards are often reloadable, providing flexibility to add funds as needed. However, they may incur an activation fee around $5 when purchased.

Important Note

Activation fees are common for open-loop cards and should be considered before purchase.

The Rise of Digital Gift Cards

Introduced in 1994, gift cards have evolved with many merchants now offering digital versions to incentivize spending. High-end stores like Saks Fifth Avenue and Bergdorf Goodman reward loyal customers with bonus digital gift cards. Despite this, 75% of gift card redemptions still involve physical cards, while digital cards account for 25%, according to a National Gift Card industry survey.

Beware of Gift Card Scams

Gift cards have become frequent targets for fraud. The Federal Trade Commission reported $148 million in gift card scam losses in the first nine months of 2021 alone. Scammers often trick victims into buying gift cards as payments, then steal the card numbers. Another tactic involves tampering with physical cards in stores to steal funds after purchase.

Target gift cards are especially targeted, representing $35 million of reported losses in 2021.

Safety Tip

Only buy gift cards from trusted sources, avoid damaged cards, and never send gift card information to unknown parties.

Frequently Asked Questions

What is a gift card?

A gift card is a prepaid card usable for purchases and transactions, classified as open-loop or closed-loop depending on merchant restrictions.

Can I withdraw cash from a gift card at an ATM?

Yes, but typically only with open-loop gift cards that are not tied to a specific retailer.

Do gift cards expire or have fees?

Some gift cards may expire if unused within a timeframe and can carry activation, reload, or dormancy fees depending on the issuer.

Final Thoughts

Gift cards remain a convenient and popular option for gifting and shopping both in-store and online. Understanding the differences between card types, associated fees, and potential scams can help you maximize their benefits safely. Stay vigilant, especially during peak shopping seasons, to protect your funds and enjoy the flexibility gift cards offer.

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