Definitions
An open-loop gift card carries a payment-network logo (Visa, Mastercard, American Express, Discover) and can be spent anywhere that network is accepted. Functionally it is a prepaid debit card with a fixed balance.
A closed-loop gift card is issued by a single brand or a controlled group of merchants. The balance can only be redeemed inside that ecosystem — Amazon.de, Zalando, IKEA, the Decathlon group, a department-store consortium.
Why the distinction matters
- Tax: in Germany, only closed-loop, in-kind benefits (Sachbezug) qualify for the €50/month tax-free allowance under § 8 EStG. Open-loop prepaid cards are treated as cash-equivalent and fully taxable.
- Fraud: open-loop balances are highly liquid and a frequent target. Closed-loop balances stay inside the retailer's ecosystem.
- Breakage: closed-loop has higher breakage (unredeemed value), which usually returns to the program owner. Open-loop breakage tends to expire to the issuer.
- Acceptance: open-loop wins on flexibility; closed-loop wins on perceived value because the recipient picks a brand they actually want.
Multi-store / choice cards sit in the middle
A multi-store or choice card lets the recipient pick from a curated list of closed-loop brands at redemption time. It feels open-loop to the recipient (flexibility) but stays closed-loop legally (because every onward redemption is with a single brand). This is the format we recommend for German Sachbezug programs.
Frequently asked questions
Is a Visa gift card closed-loop?
No. A Visa or Mastercard prepaid gift card is open-loop and is treated as a cash-equivalent benefit in most tax regimes, including Germany.
Is Amazon a closed-loop gift card?
Yes. An Amazon gift card can only be redeemed on Amazon, making it closed-loop. In Germany it is generally compatible with § 8 EStG Sachbezug if used within the €50 monthly limit.
Can a choice card qualify for Sachbezug?
Yes, when every redemption option is itself a closed-loop, in-kind benefit and the card is not convertible to cash. gift.cards' choice cards are configured this way for the German market.