TOPIK UTAMA
What is a Prepaid Card?
In addition to allowing you to take your money with you on a card and not in cash.
For this and more, prepaid cards are becoming more used every day. In this post we will mention what they are, how prepaid cards work and types of prepaid cards so that you can determine which one is best for you.
As you know, there are several types of cards, including the prepaid or prepaid card, a means of payment used to allocate a specific amount of money.
A prepaid card is a means of payment that can be purchased through a bank, online stores or credit unions. It consists of a card that has an assigned amount of money which can be used to make physical or virtual purchases with the amount charged to it in advance.
Types of Prepaid Cards
There are two types of prepaid cards:
- The non-rechargeable, which are those whose balance can be used only once, after which it is invalidated.
- The rechargeable ones, which are those to which you can recharge balance over and over again and use it whenever you want.
Prepaid cards are widely used to assign fixed monthly amounts of money from one person to another. For example, payroll cards, cards that award some government benefits, cards issued to disburse student loans and benefits, cards to receive salary, etc.
The prepaid card works in a similar way to a debit card, since you can make purchases at point of sale and withdrawals at authorized ATMs as long as the card has an available balance. It should be noted that this balance has a maximum limit, so you will not be able to top up more than the amount set for the card.
Prepaid cards are accepted just like debit and credit cards and have the logo of the franchise to which they belong, be it Visa, MasterCard, American Express, Diners Club. And due to its characteristics it is widely used to make online purchases especially.
What Prepaid Cards are There?
The banks and companies that issue prepaid cards are increasingly varied, and the users who request them have started as a safer payment method, since its use is not linked to a bank account, so customers do not see the need to enter their personal data in a web portal.
Prepaid cards are specially designed to make online purchases safer, and although most are virtual cards, others are issued in plastic to be used in commercial establishments or to give gifts. They are wallets in which you deposit a certain amount of money and then use it for a specific purchase or several purchases, either in physical stores or online purchases.
What prepaid cards are there? They are classified as physical prepaid cards and virtual prepaid cards.
- Physical prepaid cards: Physical prepaid cards have the appearance of a bank card, with a magnetic stripe and purchase PIN, so they can be used in almost all businesses, so that you can make purchases with the money previously reloaded on it. They are very useful for those who make their purchases in physical stores.
- Virtual prepaid cards: Virtual prepaid cards, as their name indicates, support their platform digitally and due to their nature, they can only be used to make online purchases or pay for services over the internet. Counting on all the data of a bank card. It is the option most used by young people and adults who like to do their shopping online or subscribe to services that require payment online.
How do Prepaid Cards Work?
Prepaid cards work as a very interesting mix between what is a debit card and a credit card, and gives the customer more security when making their virtual purchases:
- They have the function of a debit card in the sense that only the positive balance that has been previously recharged can be used from them. That is, you cannot get into debt with a prepaid card. But at the same time it gives you the security that this card is not associated with your bank account, so you avoid scams that you may be a victim of by providing your debit card information to make purchases online.
- At the same time, they work like a credit card since they have a card number and a CVV with which you can make your purchases. But unlike common credit cards, with prepaid cards you can generate different CVVs for different purchases, so that no one will have access to the funds on your card, which makes your online transactions much more secure.
As you can see, the operation of prepaid cards is very simple and has the necessary security systems to make online operations more secure. Many cards even have a useful life of a few days, so that you make your purchase and it is disabled. If you need another card, just access your bank username and generate another with different numbers. They are that easy!
Differences between a Prepaid Card and a Debit or Credit Card
As we have mentioned, the operation of the prepaid card is similar to that of the debit card since you can only use the available funds. But one of the differences between a prepaid card and a debit card is that the latter is associated with your bank account, so when you use it, you are using the funds in your bank account.
However, the prepaid card is not associated with a bank account, so the funds you use from it are not in any bank account but on the card itself, and are the funds that have been reloaded on it.
In some cases, the bank allows overdrafts with the debit or credit card, but with the prepaid card this is not possible, since you can only use the balance previously recharged on it. When you run out you will not be able to continue using it until you recharge it.
Another difference between the prepaid card and the debit or credit cards is the level of security, which is lower and therefore offers less protection to the consumer.
Advantages of Prepaid Cards
This payment instrument is very versatile and has attractive advantages that you should know about:
- Prepaid cards are very easy to request since, since they do not incur debt risk for the bank, many times all you need is to request it from your customer portal.
- They are easy to use and you can access virtual or physical formats.
- They are very safe since they can only use the positive balance they have, and if they are virtual you can change the security code once your purchase is finished so that the previous one disappears.
- You do not get into debt with them so you can better control what you buy.
- You can use them to give gifts to family and friends or provide money to someone who does not have a bank account.
- They are associated with brands such as Visa and MasterCard, which is why they are globally accepted.
- If you will only make purchases online, virtual cards are the best option, but if you also want to use them in shops or give them to someone, you also have a physical one.
- There are both bank and non-bank prepaid cards, so if you do not have an account at the banks that offer them, you can request one from businesses authorized by the CMF.
- Most have no issuance or maintenance cost.
- Some allow you to make ATM withdrawals.
