Are prepaid cards a solid choice for consumers and businesses? For most consumers and businesses, the cards are quite useful in a variety of use cases. Prepaid cards are also called “stored-value cards” and are simply payment cards that are pre-loaded with funds and are used as cash-equivalent payments. These cards offer multiple benefits for consumers and are useful for businesses as a secure gift for loyal customers or as a trackable and fast compensation method.
Here are some of the benefits for prepaid cards along with some caveats:
Spending Flexibility and Debt Management
The universality of prepaid cards is attractive because users do not need to worry about merchants declining purchases. Consumers can shop where they want while controlling their spending with a fixed amount. They’re accepted globally, and if the cards are lost, there’s only the potential to lose the amount on the card. Many prepaid cards offer loss/stolen card resolution services that can replace the card value for fast reimbursement.
Prepaid cards are one way for consumers to limit their current debt or avoid new debt loads through credit cards. Since the money spent on a prepaid card is already in hand, then there’s no resulting bill. The consumer simply buys a card with available funds and can avoid piling on more credit card debt that carries a high interest rate. There’s no bank account required to purchase or use a prepaid card, and a consumer with poor credit has no restrictions on obtaining a stored-value card. Not to mention, the consumer decides the amount on the card, so there’s no way for them to turn a planned $200 shopping visit into a $500 shopping spree. Consumers should understand that they cannot spend even a penny over the card limit, so they should factor in any applicable sales taxes when planning a purchase.
Paying and Supporting Gig Workers
Prepaid cards have emerged as a useful tool for employers especially within the “gig economy.” This encompasses short-term workers who aren’t on traditional payrolls. The types of gig work are rapidly expanding which opens new opportunities for the usage of prepaid cards. Employers who offer instant payment via branded prepaid cards can ensure their pool of gig workers are satisfied and more likely to return to work as needed. The cards help vulnerable workers avoid fees and predatory lending practices from check cashing services.
For an example of gig workers in action, consider sales departments that might hire seasonal or short-term staff in order to boost revenue. If these workers are out on the road, then they would traditionally save their receipts for gas, meals and other related expenses. Giving these gig workers a prepaid card eliminates the need to pay for things out-of-pocket and removes the tedium of paper-based expense reports. The company can also pay the salesperson’s commissions via prepaid cards.
Managing Relief Fund Donations During a Disaster
Have you ever wondered how donations are quickly dispersed during natural disasters? Prepaid cards make it possible for aid agencies, like those aiding Jamaica after the recent earthquake or those aiding the wildfires in Australia, to ensure donations are urgently put toward relief efforts. Field-issued prepaid cards have not only proven to help disburse funds rapidly to those in need but provide full transparency and accountability to administrators, regulatory bodies and donors.
Leveraging Brand Opportunities
Prepaid cards are an ideal method for businesses to give and then track rewards given to their most loyal customers. They’re easy to ship and store, and firms can use a prepaid provider to manage balances and track the cards usage. Businesses can also utilize the cards to make instant and secure payments to partners and part-time staff.
Some prepaid card providers offer companies a completely branded solution. This includes the ability to use an online branded portal to check balances, transaction history and perform other card-related functions. The actual cards and any associated collateral can also be customized with a brand’s look and feel, so the customer or partner receiving the card has a more impactful and longer-lasting experience.
Checking the Fine Print
Not all prepaid card providers and actual cards are built equally. While prepaid cards are beneficial for many consumers and various use cases, not all of them offer the same fees and limitations. Consumers should still read the “fine print” before making a prepaid card purchase in order to avoid any unexpected fees. They should also look for any expiration dates on the cards to avoid losing out on soon-to-be-expired funds and carefully review any fees for balance checks and reloading the cards. The fees are often designed so that users can get the full value and utility when used as intended. The fees are there to cover the costs of providing the universal acceptance and providing for the security of the transaction and protection against fraud and loss.
Prepaid cards are great tools for businesses as both loyalty gifts for consumers and as a payments and expenses tool. For consumers, the cards enable better spending and budgeting management while offering the flexibility to make any type of card-accepted transaction.