What is a prepaid card

prepaid card

A Prepaid card is a card that mostly works like a credit card or a debit card but it has to bee preloaded with money for the cardholder to spend. The card can be used in outlets that credit and debit cards are used.

Prepaid card advantages

• A prepaid card uses money that is loaded. This means it will not lead you to get into debt. Prepaid card can help manage your finances and the amounts loaded will be what is available for use.
• It does not matter whether you have a bank account or not, the applicant can access the prepaid cards when they purchase the cards. This card may be used to reach the unbanked masses in many countries.
• The prepaid card can be given to your children or wife while they travel. The card can be reloaded online for whatever amount is required as per the guidelines of the card company.
• Prepaid cards are faster to get since there is no credit check done.
• The prepaid cards are used to improve credit rating but the cardholder or the card company must give this account to the card reference bureau.
• The cardholder is able to load just what they require especially where they are suspicious of online fraud. Once the funds are depleted, the cardholder waits for the next time when they want to shop and then they load just what they require. This card is not linked to a current or savings account, so if a card is stolen, the money in the bank account is not touched and is safe.

Prepaid card disadvantages

• The prepaid cards have many charges that eat away at the available spending amount. Some companies have hidden charges and after the card has been used at a point of sale or ATM, a charge is debited directly in the cardholders account. Ensure to understand all the costs that are associated with the prepaid card that you get
• There is no cash back guarantee like for credit cards. When a prepaid card is used online, and the goods are not delivered or are damaged, some prepaid card companies do not insist that the cardholder get their money back.
• For those customers who do not like to go online, the prepaid card is seen as a problem since the cardholder is expected to get their balance online. They may be embarrassed if the transaction fails due to lack of funds.

A  cardholder has to be aware of prepaid card advantages and disadvantages of the product they have signed up for.

Advantages and disadvantages of debit cards

Advantages of debit cards

• Use only what the cardholder has as it debits the bank current or savings account. The cardholder does not go into debt since they can only use as much as they have in the account.
• A debit card can be used in the same outlets as a credit card and acceptability is higher than for cheques. Getting debit cards is faster than credit cards and for those with bad credit ratings are not affected by getting debit cards.
• One may use the cards at numerous ATMs that have the logo of the association branding their cards in many countries.
• Goods and services can be purchased online. When goods and services are not received as per the order given, the cardholder can get a refund or cash back for the merchant.
• With a debit card, the cardholder does not have to physically visit their bank to get cash but can use the card at a merchant outlet
• When debit cards are used, the merchant gets refunded fast by their bank accounts being credited. They do not have to keep cash in their tills and so can save on security costs and bulk cash banking costing.
• It is easier for the merchants to balance their accounts since they are using reports from the Point of sale machines.
• The merchant does not have to struggle to get change, especially in small denominations when a card is used. When cash is used, the merchant must have the change in small denominations to give customers. It also takes more time to count the coins to balance the days work.

Disadvantages of debit cards

• The cards debit the accounts immediately as the transaction happens. This gives no grace period like in a cheque transaction or credit cards.
• It is harder for the customers to make their reconciliations on transactions since receipts’ are not kept by the cardholder for long. The statements for many current or savings accounts are given to customers quarterly or twice a year. For a customer to receive the e statements they have to pay a fess for the service.
• If the account has no money, the card cannot be used unlike for a credit card. If the card is allowed to overdraw the account, the charges are hefty
• when fraud is commited, the insurance in the card is less than the amounts on the credit cards

It is important for all holders of debit cards to consider both the advantages and disadvanages of debit cards.

card payment schemes

The main business carried out by card payment schemes is processing of card transactions between acquiring banks and the issuing banks. A list of the card payment schemes below, showing links to the NYSE:

MasterCard Worldwide (NYSE: MA) card payment schemes

This is a multinational company from America.  Since 2006, mastercard has been listed and publically traded, meaning anyone can invest in Mastercard shares.

Visa Inc.( NYSE: V) card payment schemes

Visa is also an American global corporate. The head quarters are in San Francisco, California. Visa is also listed in the NYSE, though this is a recent listed. Visa has operated since 1966 when it was founded.

Japan Credit Bureau (JCB) card payment schemes

This company was founded in 1961 and in 1968 it bought Osaka credit bureau. The purchase made the card get dominance over the credit card market in Japan. JCB co. Limited is its English name. JCB issues cards in twenty countries

American Express Company (NYSE: AXP), card payment schemes

AmEx is another name for American express company. This company was founded in 1850 with head quarters in New York. It forms one of the thirty components for the dow Jones industrial average. It is a global financial services firm. The AmEx charge cards, credit cards and travelers’ cheques have made this payment scheme very well known.

The company has a mascot which was adopted in 1958. This is the image of a centurion or a roman gladiator which appears on their travelers’ cheques and charge cards. AmEx has strategy to have their customers spend in large volumes which have paid off.

China unionpay card payment schemes

CUP is also referred to as Union pay, is a chiness card. It was founded in 2002 March. It is an approved card scheme by the central bank of China – people’s bank of china.  It is the only domestic bank card organization. China Union Pay acts as interbank network for China but Macau and Hong Kong. This card scheme also links ATMs for major banks and smaller banks. Funds transfer and point of sale are part of the network.

Both mastercard and Visa provide banks and financial institutions with branded payment products which are used for ATM, prepaid, credit and debit cards for customers.  Mastercard and Visa do not issue or Acquire cards so they do not extend credit or even set the fees and rates financial institution offer their customer.

China unionpay is one of the card payment schemes with potential to compete with the American Associations.