Over the years, a new amazing financial tool has been introduced to cater to the diverse payment needs of industry processes as well as customer segments. This awesome new financial tool is called the prepaid card.
Some of the many uses of prepaid cards include payroll processing, gifting, consumer transit, healthcare reimbursements, employee incentive processing, and government benefits disbursements.
Unbanked individuals who either have a poor credit history or are new to banking are also seen as one of the sectors that can benefit most from using prepaid cards. While unknown to many, there are different types of prepaid cards.
Discover the different types of prepaid cards as well as the essentials of this highly beneficial financial tool in this article.
Different Types of Prepaid Cards
Basically, there are 2 types of prepaid cards: single use or non-reloadable and reusable or reloadable cards.
Promotional cards, gift cards, incentive cards, and rebate cards are some of the most common examples of non-reloadable or single use prepaid cards. In other words, once the balance available in the card has been depleted, the card is considered useless.
In most cases, single use or non-reloadable prepaid cards are only honoured and accepted at single merchant or merchant chains. These types of cards are also typically not redeemable for cash. They are also not intended for international use.
A reloadable prepaid card on the other hand, as the name implies, allows cardholders to load and reload funds onto the card so it can be used over and over again. Some of the most common examples of reloadable prepaid cards include payroll cards and cards used for government benefits.
Single-purpose reloadable cards such as those used for public transits or used for purchases at Starbucks are classified as single-purpose reloadable cards. These types of cards can also be used to make everyday purchases. They can also be used to perform ATM withdrawals.
Reloadable Prepaid Cards versus Gift Cards
Typically, gift cards come with an amount that’s predetermined (i.e $25, $50, or $100). As mentioned earlier, once the balance available on the card has been depleted, cardholders can no longer reload money on the card.
Gift cards are also generally anonymous and are primarily given away as gifts. A reloadable prepaid card on the other hand is typically personalised. Unlike gift cards, reloadable prepaid cards also come with other amazing benefits and features that’s absent in the former.
Prepaid Cards versus Debit Cards
Unlike prepaid cards, debit cards are tied to a checking or other demand deposit accounts. That being said, bank debit cards also have different features as well as protection for their users.
Case in point: fraud and purchase protections as well as dispute resolution rights may not be the same between reloadable prepaid cards and debit cards. While protections offered are more robust for debit card users, reloadable prepaid cards are deemed more low risk.
Ideal Prepaid Card Users
While anybody can benefit from the reloadable prepaid card’s many exciting features, they are considered more attractive by individuals who don’t have access to credit or debit cards for one reason or another (bad credit history, no credit history, or those who are not comfortable dealing with banks).
Reloadable prepaid cards are designed to make paying as well as managing finances a lot easier for the unbanked as well as the underbanked. Why? They also allow cardholders to do direct deposits, online purchases, bill payments, as well as ATM withdrawals.
Reloadable prepaid cards are also considered ideal for those who would like to avoid accumulating debt, curb overspending, and would like to easily track and manage their spending.