Closed Loop Card

American Express, MasterCard, and Visa credit cards allow you to make purchases across a vast number of merchants. These are known as open loop cards.

But there's an entirely different type of credit that exists. It's called a "closed loop card."

You sign up for a payment card that can only be used at one store. Retailers have traditionally offered this as a way to entice customers to shop exclusively at their locations. So, a retailer like Kohl's, for example, will give you credit for up to $1,000, and you can only use that line of credit at their locations.

Closed loop debit cards also exist. These can be defined as gift cards, where a user loads a pre-determined amount of money onto a card, and the money can only be used at these locations. This is why you have a $50 Sbarro gift card sitting in your drawer, even though that pizza place went bankrupt a long time ago.