Stored Value Card

What a stored value card is

A stored value card is funded in advance, and purchases draw down the available balance rather than a credit line. Employers, government agencies, insurers and retailers use these cards for payroll, benefits, transit, reimbursements, incentives and gifts. Some are reloadable; others stop working once the original amount is spent.

In a narrower technical definition, stored value is recorded on the payment instrument itself, while prepaid value is recorded in a remote database. In everyday use, the labels overlap. Open-loop cards connect to a card network and work at participating merchants; closed-loop cards are limited to a defined business or group of locations. A gift card is one kind of stored value card, but the broader term also covers payroll, benefit and transit programs.

Stored value covers more than gift cards, and your processing cost depends on the card program and acceptance setup.

How stored value cards work

The issuer or cardholder loads funds, and the card program tracks the balance. At checkout, an open-loop purchase receives network authorization against the available balance. If the purchase exceeds that balance, the authorization is declined; completing the sale then requires a balance check and a separate payment for the remainder.

Card rules can limit where funds are spent. For example, a flexible spending account card is restricted to eligible medical purchases, while a payroll card gives an employee access to wages loaded by an employer. When you issue cards, spending limits and merchant-category restrictions help keep purchases within the program's purpose.

What stored value means for your costs

Accepting an open-loop stored value card involves network authorization, so your processing arrangement determines the merchant cost. There is no universal stored-value fee or standard statement line for these transactions. Compare the fees on your statement for the card types and transaction channels you accept, rather than assuming every stored value program has the same price.

Cardholder fees are separate from your merchant costs. Depending on the program, the cardholder might pay for an ATM withdrawal, reload, monthly maintenance or inactivity. For an open-loop card return or cancellation, the issuer may take several days to release the funds. That delay can frustrate a customer who expects the balance to be available immediately.

What you can actually change

You do not set the cardholder's program terms, but you control how your business accepts cards and manages any cards it issues. Focus on costs you can verify and on preventing avoidable checkout and spending problems.

• Separate open-loop stored value transactions from other card types when reviewing processing costs.
• Test balance checks, split payments and returns with the card programs your checkout accepts.
• For cards you issue, set spending limits and category restrictions that match the program's purpose.
• Give staff a clear process for declined transactions and returns when a balance is not immediately available.

1. 01
   Review transaction costs. Compare the fees tied to open-loop stored value transactions with other card acceptance costs on your statement.
2. 02
   Test checkout flows. Run a purchase, a balance check and a return with the stored value cards your customers use.
3. 03
   Set card controls. If you issue cards, align spending limits and purchase restrictions with their intended use.

Frequently asked questions