Nowadays, it has become almost impossible to go about your financial transactions without using some sort of plastic card. Case in point, many people now make car reservations, car rentals, or do purchase transactions using their credit, debit, or reloadable prepaid cards.
So how did people become highly dependent on beneficial financial tools like debit, credit, or reloadable prepaid cards? The answer can be seen when we examine the evolution of the mighty reloadable prepaid cards.
The Plastic Card Evolution
To have a clear understanding of how today’s reloadable prepaid cards evolved, let us go back to where things first started.
The evolution of credit cards came naturally. During the American West, pioneers charged items they purchased using cash as they had money. The sharecroppers on the other hand depended on the credit given out by landowners. Landowners also provided food and supplies to the sharecroppers and they paid back using a percentage of the crops they harvested.
Later on, stores defined credit limits, with others introducing the 90-day credit discounts. In a similar setup, customers can charge purchases, take the merchandise home with them, and pay for their purchase over a 3-month period without interest. While this setup was initially store-based, they evolved to today’s credit cards.
In essence, credit cards represent borrowed money. It is also agreed that the user can buy on credit and pay for the purchase at a later date. The first ever widely accepted credit card was the Diners Club. It was introduced in 1950. In 1959, Bank of America introduced their first “revolving” charge card known as the Bank Americard.
As the credit card system evolved, computer technology also evolved significantly. This helped further revolutionise banking. In the mid-1980s, ATMs (automated teller machines) enabled access to cash and account information 24/7.
In 1984, banks introduced a new financial tool known as the debit cards. Unlike credit cards, debit cards are linked to the cardholder’s bank account. When used for purchase transactions, payment is directly withdrawn from the cardholder’s bank account. Thanks to the convenience they offer, debit cards soon became a preferred replacement for checks and cash. By 1998, more people used debit cards than checks.
Recently, another beneficial plastic card was introduced: the amazing reloadable prepaid card. The reception reloadable prepaid cards received has been nothing less than warm and impressive. In fact, a Federal Reserve Payments Study conducted in 2010 revealed that prepaid cardholders conducted a staggering 6 billion transactions amounting to $140 million. And this figure is in 2009 alone!
Need further proof of the reloadable prepaid card’s popularity? From 2006 to 2009, usage of reloadable prepaid cards increased by as much as 20 percent. As if not enough, the value of said transactions also increased by as much as 22.9 annually. At first, transactions using reloadable prepaid cards comprise just a small portion of the total non cash payments.
However, that changed relatively over the years and reloadable prepaid cards became the fastest growing option among the plastic cards. This trend was first noticed in the late 1980s when prepaid phone cards were first introduced. This was then followed in the middle of the 90s with the introduction of the merchant specific or closed-system gift cards.
Open-system cards on the other hand were first introduced in the early 1990s. This was when the US government introduced the Electronic Benefits Transfer (EBT) cards as replacement for the paper-based food stamps. Open-system gift cards were also first introduced to the public in the mid-1990s.