Definition Edit

A prepaid debit card (also called a reloadable debit card or reloadable prepaid card) are often used for recurring payments. The payer loads funds to the cardholder's card account.

Overview Edit

Prepaid cards were introduced in the payments market at the end of the 1990s as an alternative to credit cards (which require the card issuer to evaluate the cardholder's minimum level of creditworthiness) and debit cards (which entail the existence of a payment account at a bank or a financial institution). Prepaid cards began as a device used to pay for goods and services where the issuer does not need to conduct any analysis on the cardholder's credit standing, or bear the costs for opening and managing a payment account. Many prepaid cards may now be used to withdraw cash from automated teller machines (ATMs) including internationally. In addition, some of them provide the possibility of person-to-person transfers. . . . At one end of the spectrum are gift cards that can only be used for purchases at a single, or among a limited network, of merchants (commonly referred to as closed-loop prepaid cards). These cards do not provide access to the global ATM network and are not able to have cash refund through merchants (commonly known as "cash back"). . . . At the other end of the spectrum are payment network-branded cards that allow transactions with any merchant or service provider participating in the payment network (commonly referred to as open-loop prepaid cards). For the majority of open-loop prepaid cards, customers use the prepaid cards to access the related funds which are held in an associated payment account. While it is possible to store related funds on a chip on the card, the use of chips on prepaid card cards in this manner has decreased.[1]

Prepaid debit cards use either the offline debit system or the online debit system to access these funds. Particularly for U.S.-based companies with a large number of payment recipients abroad, prepaid debit cards allow the delivery of international payments without the delays and fees associated with international checks and bank transfers.

References Edit

  1. Guidance for a Risk-Based Approach to Prepaid Cards, Mobile Payments and Internet-Based Payment Services, at 5.

See also Edit

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