What is Prepaid?
Prepaid payment products and services provide consumers, businesses and government departments with an alternative way to make payments. Funds are pre-loaded onto a device such as a card or an electronic voucher.
How are prepaid products used?
Consumers may use a prepaid product instead of cash or a debit or credit card. They may also be used by consumers to control what they spend or as a means of storing funds in a safe way while travelling. Employers may use prepaid products to pay employees or control expenses. Government departments may use prepaid products to disburse benefits.
Where are prepaid products used?
Prepaid cards are generally termed 'closed' or 'open' loop. A closed loop card can be exchanged for goods and services only in a limited or pre-defined number of outlets, for example, store cards, fuel cards and transport cards. In contrast, open loop cards are branded by one of the card schemes (e.g. American Express, MasterCard, Visa) and can be used at multiple locations both at retail outlets and in some cases to withdraw cash at ATMs. Certain types of Prepaid cards or vouchers can also be used to make payments online.
What is the difference between a reloadable and non-reloadable prepaid product?
In general terms non-reloadable or 'single-use' cards are purchased or issued with a fixed value pre-loaded onto the card and cannot be 'topped-up'. Examples include gift cards or cards issued as part of an employee reward or incentive scheme. Reloadable cards may include travel money cards or payroll cards which can be reloaded with funds as needed and used for everyday purchases.
What are the fees and costs of having and using a prepaid product?
There are many types of prepaid products available for different purposes. The services each one provides may be charged for in different ways and you should always check the terms and conditions as fees and charges vary. Some of the most common fees and charges are:
- Purchase or application fee (to set up the account and provide the card or product)
- Transaction fee (there may be a charge for ATM withdrawals both at home and abroad)
- Purchase fee (there may be a charge for each transaction or certain types of transaction such as purchases made online)
- Top up fee (there may be charge to load additional funds onto the card or product. Charges may vary depending on how or where products are topped up)
- Monthly service charge (this may provide access to certain services such as a helpline)
Who issues prepaid products?
In some countries banks are the main issuers of prepaid products. In Europe certain types of prepaid products may only be issued by banks, credit institutions and authorised e-money institutions.
What is the role of organisations such as PIF?
PIF is a trade body established to help promote and shape the development of prepaid products and services. It works closely with regulators, government agencies, consumer bodies and the media to promote awareness of prepaid products and explain how they are used. PIF encourages its members to be responsible participants in the prepaid industry and acts as a catalyst for the development of best practice guidelines.