A stored value card is a card that holds money paid in advance, ready to be spent later. Gift cards are the best-known example, but the same idea sits behind transit cards, campus cards, payroll cards and many digital wallets. This guide explains what a stored value card is, how it works, the main types and how it differs from debit, credit and prepaid cards.
Stored value card definition
A stored value card is a payment card loaded with a set amount of money in advance. The holder spends against that balance until it runs out, and in some cases reloads it. Unlike a debit card, it isn’t linked to a bank account, and unlike a credit card, there’s no borrowing: you can only spend what’s been loaded.
How a stored value card works
- Loading. Money is paid in by the buyer, an employer or the holder, and the value is assigned to the card.
- Activation. The card is activated, usually at the point of sale once it’s paid for, so it can’t be used before then.
- Spending. Each purchase is checked against the available balance and deducted from it.
- Reloading. Reloadable cards can be topped up; single-use cards are spent until empty.
- Settlement. Behind the scenes, the money is passed to the business where the card was spent.
Our guide to how gift cards work follows this lifecycle in more detail for gift cards.
Where is the value actually stored?
Despite the name, the money usually isn’t on the card itself. Most modern stored value cards are host-based: the balance is held in the issuer’s system, and the card number, barcode or code simply identifies the account. Some older or offline systems, such as certain transit or campus cards, are card-based, with the balance written to a chip on the card. Host-based cards are easier to secure, can be blocked and replaced if lost, and work equally well as physical cards or digital codes.
Types of stored value card
- Closed-loop gift cards. Can only be spent with the brand that issued them. See closed-loop vs open-loop gift cards.
- Open-loop prepaid cards. Branded by a payment network and accepted wherever that network is, like prepaid gift cards.
- Transit cards. Loaded with fare value for buses, trains and subways.
- Campus and corporate cards. Used for meals, printing and services within one organization.
- Payroll and benefit cards. Used to pay wages or benefits to people without a bank account.
- Phone and content top-ups. Prepaid value for mobile airtime, games, streaming and software.
- Digital wallets. App-based balances that work like a stored value card on a phone.
Stored value cards vs debit, credit and prepaid cards
| Stored value card | Debit card | Credit card | |
|---|---|---|---|
| Money comes from | Value loaded in advance | The holder’s bank account | A credit line from the issuer |
| Linked to a bank account | No | Yes | No (linked to a credit account) |
| Can overspend | No | Sometimes, with an overdraft | Up to the credit limit |
| Typical uses | Gifts, transit, rewards, payroll | Everyday spending | Everyday spending, borrowing |
“Prepaid card” and “stored value card” are often used to mean the same thing. In practice, “prepaid card” usually means an open-loop card on a payment network, while “stored value card” covers both open- and closed-loop cards.
Why businesses use stored value cards
- Cash upfront. Value is paid before anything is delivered.
- New and repeat customers. Gift cards bring in recipients; reloadable cards keep customers coming back.
- Control. Closed-loop cards keep spending within the brand.
- Lower cash handling. Fewer cash transactions in stores, canteens and transit.
- Data. Every load and spend is recorded, which helps with planning and reporting.
Rules that apply
Stored value cards are regulated, and the rules depend on the card type and the market. Closed-loop gift cards generally carry lighter rules than open-loop cards, which can fall under e-money and payments rules. Our gift card regulations guide sets out the main rules in the US, UK and EU.
How epay Conductor helps
epay Conductor supports closed- and open-loop stored value programs on one platform, from issuing and distribution to processing. Brands use it for gift cards, prepaid cards, digital wallets and digital content. Learn more about epay’s stored value processing or request a demo.
Stored value card FAQs
Is a gift card a stored value card?
Yes. A gift card is a stored value card loaded with money to spend with one brand (closed loop) or anywhere the card’s payment network is accepted (open loop).
Can a stored value card be reloaded?
Some can. Reloadable cards, such as transit cards and some gift and prepaid cards, can be topped up. Single-use cards are spent until the balance runs out.
What is a stored value account?
The record in the issuer’s system that holds a card’s balance. With host-based cards, the card, barcode or digital code is just a key to that account, which is why one balance can be used from a physical card, a phone or online.
