What is a pre-paid card?

Pre-paid cards can be compared to gift cards or pay-as-you-go mobile phone deals. When you choose pay-as-you-go, you need to top up the card every time you want to use it, with whatever amount you choose. Your pre-paid card works exactly like that- once topped up with a certain amount, you can use it to pay for goods just like you would use a debit or credit card for. If you want to continue paying with that card, you need to top it up online, at an ATM machine or at a physical shop.

There are virtual and physical pre-paid cards, and customers may be able to choose the type of card they prefer. Note that if you request a physical card, you may have to pay a small fee for the production and delivery of the card, which will be taken out from your available funds. Customers can get a pre-paid card at a retailer, bank or other financial services provider. They can be used with any merchant that accepts its credit card network, such as Visa or Mastercard.

Pre-paid card features and considerations

• Fixed funds

Unlike debit cards, pre-paid cards aren’t linked to a bank account, so the funds you have there won’t fluctuate. There is a fixed amount that you can spend and, if you try to purchase a product and don’t have enough funds on the card, the payment will be declined. You need to top up the card if you would like to use it for more purchases.

• Amount limits

Pre-paid cards may impose a fixed limit on how much you can spend daily, how much you can withdraw from an ATM machine and how much you can load into your card. All of these limits vary widely depending on the card types, so you need to check the features of the pre-paid cards on an individual basis. Usually, spending limits are around the £5.000 mark, ATM withdrawal limits are between £500 to £1000 and top-up limits are up to £10.000.

• Expiration dates

Pre-paid cards usually have shorter validity periods, which vary between 1 to 3 years. Pre-paid card holders must keep this in mind and either use the funds before the card expires, or request your card to be reissued so you can keep your funds. Even if your pre-paid card expires, your funds don’t, so you don’t have to worry about losing money.

• Extra fees

There are quite a lot of fees involved with getting and managing pre-paid cards, including card application fees, monthly or annual service fees, and cancellation or replacement fees. You may also want to check for additional fees for ATM withdrawals, purchases and foreign transactions. Altogether, these fees can add up to daunting values. However, most pre-paid cards offer a lot of these features for free. It is crucial that you check the features of your pre-paid card before applying for one or using it.   

Advantages and disadvantages of pre-paid cards

One of the great advantages of pre-paid cards is the convenience that they offer. This is particularly true for companies that need to pay out to their customers in a fast and efficient way. Customers are expecting a quick claim resolution, and want to have their funds available as soon as possible. Whilst bank transfers may take a few days to settle, pre-paid cards can be issued and topped up instantly. They are also widely accepted by merchants, so your customers can use them to purchase whatever they need.

Pre-paid cards are also safer than carrying cash and make it easier to track expenses, as they have a limited credit and need to be manually topped up. Some cards also offer cashback on every purchase or at selected retailers. There is a wide range of prepaid cards available, so customers and companies can choose the most suitable ones for them.

The most worrying aspect of pre-paid cards is the charges. Whilst some pre-paid cards may have very limited fees, others have fees for anything you can think of, including using your card too frequently or not frequently enough, checking your balance or even contacting customer support. Therefore, it is extremely important to double check the small letters this before ordering or using your pre-paid card. Another disadvantage that pre-paid card holders may find is that some online merchants may not accept your pre-paid card, even if its card network is Visa or Mastercard. This is another aspect to keep in mind when making purchases.

How Imburse can help

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.

In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.