Increased demand for cash alternatives and ecology-friendly payment methods have significantly altered the modern financial market. Nowadays, there is no need to go to a physical store and pay with paper money. By making a few clicks, it is possible to purchase goods and pay for services without leaving your home. All of this would be impossible without e-wallets, bank cards, cryptocurrency, and of course prepaid cards.
The size of the international prepaid card market equaled almost $1,848 billion in 2019 and is expected to reach $5,510.87 billion by 2027 with an impressive 14.9% compound annual growth rate. From our overview, you are going to learn more about the concept of prepaid cards, their main types, hits and misses, and the areas of use.
Prepaid Cards – Definition And Types
A prepaid card is a card that allows users to spend the money that is previously loaded into their cards. It can be used for online purchases, paying the bills, and even gambling. These cards are issued to users who don’t qualify for opening a bank account or are not willing to have one. The most popular representatives are Paysafecard, Venmo, and AmazonPay. Main credit card companies like Visa, American Express, and Discover also issue prepaid cards of their own.
In some ways, prepaid cards are similar to gift cards because you are able to spend only the amount that is already loaded into the card. When the balance is used, users can reload it on the Internet, at a physical store, or ATM. Here are some of the most popular types of prepaid cards:
- Open-loop cards (with a network logo) which can be used in most stores
- Closed-loop cards which are used at a certain retailer
- Reloadable cards
- Payroll cards for salaries
- Gift cards
- College cards to pay for the goods and services on campus
Where You Can Use Them
It is difficult to find an industry where users can’t pay with prepaid cards. More and more merchants add this payment method to the list, so you just need to check out the banking section to see if your prepaid card is on offer. Here are the most popular industries where you can use this method:
- Retailers like Walmart, Amazon, Costco, and Target accept prepaid cards or even issue their own cards.
- Gambling sites. It is not rare to come across an online casino with Paysafecard and players love the fact that this payment method is anonymous and fast.
- Government and financial institutions. People can pay their bills using prepaid cards.
- Gift cards. They are extremely popular among people who want to make a gift but don’t want to purchase something unwanted.
You can also buy tickets to events and trips using a prepaid card.
Advantages And Disadvantages
It is impossible to invent a payment method that would satisfy the needs of all population segments. That is why it’s important to be aware of the pros and cons of prepaid cards to make the correct decision. We have made a list of the key features to keep in mind.
- No need to have a positive credit history. A prepaid card is a great option for those who haven’t built a credit history yet, don’t have a good one, or live without debit/credit scores at all. No one checks your credit scores before approving the card.
- Anonymity and privacy. When using cards like Paysafe, you don’t share personal information and the merchant sees only your voucher number. Plus, if the card is stolen, a thief will only steal the money on the card and not your personal data connected to a bank account.
- Users don’t need a bank account. If for some reason you don’t want to open an account, a prepaid card becomes a great alternative: you can pay for the goods and services without time-consuming registration procedures.
- Efficient budgeting. If you are tempted to spend more with credit cards, prepaid ones will surely solve the problem. If the prepaid account is not loaded with funds, you simply can’t use it. This is especially beneficial for compulsive gamblers and shopaholics.
- They are less protected. While you won’t lose personal details in cases of theft, it will be almost impossible to return the stolen money. In this situation, prepaid cards are similar to cash – the stolen money is gone for good. Fortunately, more and more prepaid companies start offering users extra benefits and improved protection.
- No credit scores. If you are willing to build a strong credit history, choose another payment option because prepaid cards don’t contribute to the credit score.
- Higher fees. Usually, prepaid card fees are higher when compared to e-wallets and bank cards. Apart from transaction charges, you should be prepaid to pay a monthly fee. For example, $6.95 for American Express and $2 for Paysafecard (only after 24 months of inactivity).
The prepaid card market is growing at a fast speed. While in 2019 28% of global users have chosen this payment option, in 2020 this figure equaled 33%. Prepaid cards give a chance to manage the budget, remain anonymous, and conduct fast payments without a need to open bank accounts and undergo background checks. On the other hand, in cases of theft, you won’t be able to return the money. Hopefully, we have given you enough information to make the right choice and decide whether prepaid cards are a good pick or not.
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