Many years ago, there were no plastic cards like debit, credit, or prepaid cards because all transactions were paid for in cash. Fast forward to today and it has become almost impossible to get by without using any form of plastic card. In fact, people now use prepaid cards for almost anything, from purchasing items to paying for rents.
The Evolution of Prepaid Cards
While many plastic cards are now available in the market, one of them stands out thanks to the peerless convenience and ease it offers—the awesome prepaid cards. During the era of the Wild West, people purchased goods at the country store and only paid for their purchases once they had money.
Back then, sharecroppers relied primarily on the credit provided by the landowners. Back then, landowners were the ones who provided supplies and food to the sharecroppers. The sharecroppers on the other hand paid for their debts through a percentage of their harvest. This was the main setup back then.
Many years later, some stores started to introduce credit limits. Around that time, the 90-day credit accounts were also introduced. With this new set up, people are allowed to get the item, charge their purchases, and pay their dues over a 3-month period (typically without any interest).
This type of setup eventually led to the introduction of credit cards. Credit cards function like borrowed money or temporary cash. With a credit card, users will use the card to purchase and pay for goods and services and pay at a later date. If payment is not made on the agreed time, interest charges are applied.
After the introduction of prepaid cards, other innovative and beneficial financial tools were also introduced. This included the amazing prepaid cards. Thanks to their exciting and enticing features and benefits, prepaid cards have earned their rightful place in the hearts and wallets of many people.
A study conducted by the Federal Reserve Payments in 2010 revealed that a staggering 10 billion transactions were carried out using prepaid cards. The total amount of the said transactions amounted to a whopping $140 billion. Over the years, usage also increased to 20 percent.
The value of transactions using prepaid cards also increased by as much as 22.9 percent. The data is from the years 2006 until 2009. Undoubtedly, prepaid cards have experienced a meteoric rise since then (and so far have not shown any signs of slowing down).
Prepaid Cards: What are the Different Types?
This might not be common knowledge but there are several types of prepaid cards. Below are some of them:
Gift cards
This type of prepaid card is considered non-refundable and closed-system. Most of the closed-system cards are typically stored-value cards. In other words, the monetary value of the cards are stored in the card itself through a small microchip. In addition, there are no external records of the card’s value that’s available on payment networks.
Closed-system cards
Closed-system cards are only accepted at single merchant or single merchant chains.
Open-system cards
Open-system cards are usually associated with established financial providers and networks. The card’s monetary value is issued in the name of the cardholder. The value can be accessed by cardholders through a unique card number. The card number is embedded on the magnetic strip of the card.
