Capture new customers who prefer to pay with preloaded cash cards
Prepaid cash cards are reloadable cards that consumers can use at any in-store point of sale or online to make purchases. These cards are network – such as MasterCard or Visa – branded. According to the Federal Reserve, they represent the fastest growing segment of non-cash payments in the U.S. Consumers simply load a balance onto their prepaid cards using cash or direct deposit and then use them to pay for purchases, just as they would use a credit or debit card. Once they deplete the prepaid card balance they can reload it or dispose of the card.
Popularity of prepaid cards
Prepaid cards are popular among the fully banked (people who regularly use traditional banks or credit unions) and the unbanked (those who don’t use these institutions). A Pew Charitable Trusts study found that consumers use prepaid cards as a complement to traditional banking products, rather than as just a replacement to them. Of adults who use prepaid cards at least once a month, 59% currently have a checking account and 45% have used a credit card in the past year.
FDIC research found that, of fully banked households who use prepaid cards, 28.9% use them to pay for everyday purchases or to pay bills, and 20.7% use them to send or give money. Among unbanked consumers who use prepaid cards, 47.6% use them to pay for everyday purchases or to pay bills, and 31.8% use them to receive payments.
Preloaded cash cards offer a variety of benefits for consumers:
Consumer benefit #1: Safer than cash
Increasingly, shoppers are aware of data breaches – and are taking steps to protect themselves and their sensitive data. According to 2017 Vantiv research, 45% of consumers are aware of merchant data breaches within the past six months. Additionally, nearly a third (29%) of consumers believe it is likely that their card information will be stolen in a data breach within the coming 2 to 3 years.
Unlike cash, should a prepaid cash card be lost or stolen, consumers can recover their funds. This is a highly attractive feature for a card payment. Consumers get the convenience (and purchase protection) of paying with a credit card, but without a credit check or needing a bank account.
Consumer benefit #2: Accepted worldwide
Preloaded cards from the larger card issuers are accepted most everywhere credit cards are accepted. This is especially attractive for those traveling to other countries, where people want to be sure that they can spend money with confidence.
If a prepaid card is lost or stolen while overseas, there is no chance of the person’s bank account being drained or identity being stolen, since the prepaid card is not connected to any of those personal details. Plus, many modern prepaid cards offer protection and reimbursement in the event of fraud or theft.
Consumer benefit #3: No debt
Since you can't spend more than what's on your card, you can't go over your "spending limit". You also don't have to worry about late fees, interest rates or monthly credit card payments. It's important to note that some prepaid cards do assess monthly, ATM and reloading fees.
When you have a prepaid card, you can only spend the amount of money that’s been loaded onto the card which helps some consumers with budgeting. This prevents overspending, overdrawing your bank account (in the event of a debit card) or receiving a surprisingly large bill at the end of the month (with a credit card).
Controlling your spending and sticking to a budget can help consumers better save for long-term goals such as retirement or paying down outstanding debts.
Have you ever overdrawn your checking account just a couple dollars – or even by less than a dollar – only to find your account hit with $30-50 (or more!) in fees? This can really put a strain on your funds and overall budget until your next payday. With a prepaid card, consumers don’t have to worry about overdrawing their account – since they can only spend what’s already been loaded on the card.
Lots of people are using preloaded cash cards to help teach their teens and college-aged kids about spending money responsibly and sticking to a budget. For example, parents load $100 of spending money on a debit card each month, and that is the child’s money for the month. If they spend it all in the first week of the month, they will find themselves short on extra money and will hopefully learn to budget more effectively the next month.
Consumer benefit #4: Access to several payment options, including quick cash
Users who have a balance on a card can withdraw cash at ATMs without having a bank account. You can also use a prepaid card to pay bills or make purchases online, or to schedule recurring payments.
Consumers can reload their prepaid cards in a number of ways, such as a bank account transfer, direct deposit, PayPal transfer or at a retail store.
Consumer benefit #5: No personal data
Preloaded cards aren't linked to personal data such as social security numbers or bank account data, so there is nothing for criminals to steal.
Because they aren’t linked to or dependent upon personal information like a credit score, general purpose cards are a great option for those with no or poor credit. People with poor or little credit will likely face high credit card fees and interest rates – or not qualify for a credit card at all. With a prepaid card, consumers don’t have to sweat a credit check or spending beyond their budget.
Some experts believe shopping with prepaid cards online can offer additional security protection. Again, if sensitive data is stolen during the course of an online payments transaction, the hackers won’t be able to drain the shopper’s bank account.
As more and more consumers look to prepaid cards as an alternative to cash, credit or debit cards you're likely to see more cross your counter. Understanding how customers prefer to pay is the first step in ensuring you can accept all card payments a customer could potentially use.