What are the Different Types of Prepaid Cards?

Many years ago, plastic cards like credit, debit, and prepaid cards didn’t exist. Everything was paid for in cash. Nowadays, it has become almost impossible to get by without using some type of plastic card. Today, people use prepaid cards to pay for accommodations and purchase items online.

The Different Types of Prepaid Cards

The different types of prepaid cards include:

• Open-system prepaid cards. This type of prepaid card is usually associated with established financial networks. The monetary value of closed-system cards are in the cardholder’s name. Cardholders can access the value using a unique card number. The card number is embedded in the magnetic strip of the card.
• Closed-system prepaid cards. This type of prepaid card can only be used at single merchant chains or at a single merchant.
• Gift cards. This type of prepaid card is considered non-refundable and closed-system. Most closed-system cards are also considered as stored-value cards. This means the monetary value of the card is stored in the card itself using a small microchip. In addition, there is no external record of the card’s value on any payment network.

The Evolution of Prepaid Cards

While there are different kinds of plastic cards available in the market, one stands out because of the peerless convenience and ease it offers—the amazing prepaid card. During the Wild West era, pioneers purchased goods at the country store and paid for the purchases when they had the money.

Back then, most sharecroppers relied primarily on the credit that was provided by landowners. Landowners provided supplies and food for the sharecroppers. On the other hand, sharecroppers paid their debts using a percentage of their harvest. This was their primary set up.

Years later, some stores began offering credit limits. Around those times, they also introduced the 90-day credit accounts. With this new set up, people are allowed to get the item, charge their purchase, and pay their dues without any interest over a 3-month period.

Over time, this set up led to the introduction of prepaid cards. Credit cards work like borrowed money or temporary cash. With a credit card, users can use the cards to pay for services and purchase goods and pay at a later time. If payment is not made on the date agreed upon, interest charges will be applied.

After credit cards were introduced, other innovative and beneficial financial tools were created and introduced including the prepaid card. Thanks to their awesome benefits and amazing features, prepaid cards were embraced and accepted wholeheartedly by the consumers.

Over the years, usage of prepaid cards has increased by as much as 20 percent. The value of the transactions using prepaid cards has also increased by as much as 22.9 percent. This was from 2006 to 2009. Undoubtedly, the popularity of prepaid cards will continue to grow.

Benefits of Prepaid Cards

Prepaid cards offer peerless benefits that are hard to match. Below are some of the most remarkable benefits of prepaid cards:

• They are budget friendly. If you would like to manage your money better, you can never go wrong with a prepaid card. Prepaid cards are considered great budgeting tools since your spending is limited by the balance that is available on your card.
• Ease of use. Prepaid cards work just like most plastic cards so there is no massive learning curve required. Loading money onto a prepaid card is also effortless and quick.
• Just like other plastic cards like credit and debit cards, prepaid cards are honored in many places both local and overseas. Prepaid cards can also be used to pay for items and services that are purchased online.