All there is to know about stored value cards
There are so many different payment options available, it's easy to get them confused. And while many payment options share similarities, they also have major differences. Today, let's take a look at stored-value cards and how they compare to other payment options.
Stored-value cards are prepaid cards where the amount is stored directly on the card itself, not in a financial system. Users can purchase stored-value cards in specific amounts already on the card. They are available at most grocery or convenience stores and since they have a magnetic stripe, they can be used anywhere credit or debit cards are accepted.
In addition to making general purchases, stored-value cards are commonly used as transit system cards, calling cards, payroll cards, rebate cards, gift cards and cafeteria cards.
Just like gift cards or prepaid cash cards, once users deplete the value on the card they can simply discard it or reload it with more funds.
While stored-value cards are similar to other payment options, there are a few key differences. The first major difference is that all of the balance details are on the card itself. With debit cards or prepaid cash cards the balance is tied to an account and not the physical card. So, if the card is lost or stolen the user can get a replacement debit or prepaid cash card and the balance can be transferred to the new card.
Not so with stored-value cards. Since all the financial information is stored on the physical card, if it's lost or stolen it can't be replaced, and anyone who possesses the card can use it.
Another key difference is since the physical card has to be present to complete a transaction, consumers can't use them for card-not-present transactions such as telephone, mail or online orders.
Given stored-value cards can be riskier than other options and are limited to card-present transactions, you might wonder why anyone would use them.
Stored-value cards do make sense for lots of situations. For a consumer without a credit or debit card, it can be tough to make certain purchases, including airline tickets or hotel rooms. In these scenarios a stored-value card might be their only option.
Stored-value cards offer stronger expense control compared to other payment methods. And since some stored-value cards can be monitored with online technology, it makes them solid options for parents who want to give their children the freedom of cash but also want the ability to track their spending.
They are also an option for employers, such as the U.S. government, who give stored-value cards to new hires to use until they are active in the payroll system.
Stored-value cards aren’t for everyone, but it's worth knowing how they operate and what sets them apart from other payment options.