Prepaid Debit Cards are a fairly new and quickly growing phenomenon. In the past, prepaid debit cards have been primarily marketed to the “unbankable” – people who have too poor of a credit rating to use an alternative or who do not have a traditional checking account for whatever reason. While this is still a major proportion of the market, prepaid debit cards are actively shifting from alternative to mainstream. The dollar value of the market has increased by more than 40% each year since 2007, the majority of that increase happening in “open loop” cards, according to the Mercator Advisory Group.
The difference between “Open” and “Closed”
Prepaid debit cards are divided into two categories: “open loop” and “closed loop”. An open loop card is issued by a bank, a credit card provider or an alternative financial institution such as Payza, and can be redeemed in many locations, providing that they are able to support the transaction. Aclosed loop card is commonly known as a “gift card” – it is issued by a specific establishment and can only be redeemed by the provider.
The pros and cons of prepaid debit cards
Within the industry, prepaid debit cards are formally known as general purpose reloadable (GPR) cards, the operative word being “reloadable”. The growing popularity of GPR cards is partly due to the fact that they can generally be used as freely as debit cards, but do not have to be attached to a bank account. The flip side is that, since GPR card providers are not necessarily subject to the same regulations that banks are, which are there to protect consumers, there can be more risk.
In response to this lack of accountability, the Consumer Financial Protection Bureau (CFPB), an American watchdog group, has initiated an expansion of the existing regulations in place on traditional credit and debit cards to cover GPR cards as well. The main cost of most GPR cards is a monthly service to be paid on top of a high initial purchase fee. The CFPB cannot keep those costs down, but they can prevent these providers from taking advantage of consumers with misleading and hidden fees.
Payza’s Prepaid Card
Payza is offering a better choice. With no monthly fee, our prepaid card is an affordable alternative to other prepaid debit cards. By using our new prepaid card, you can make online or in-store purchases anywhere in the world with the comfort of knowing that your money is safe. You can pre-order the card now to start shopping anywhere VISA or MasterCard is accepted.