Prepaid cards have come a long way in the last decade, in part due to the number of consumers who have opted to abandon traditional bank accounts. Referred to as the unbanked, these consumers account for nearly 30 percent of prepaid card users and have contributed to the multibillion-dollar prepaid card industry. In fact, prepaid cards were loaded with a staggering $65 billion in 2012 alone.
In addition to the unbanked and the underbanked—those who maintain bank accounts but still use prepaid debit cards—plenty of individuals and businesses are using prepaid cards. People are realizing the amazing benefits that come with prepaid cards, especially when you compare them to traditional financial instruments like bank credit and debit cards.
From easier business transactions to budgeting to travel, here are five of the biggest benefits of prepaid debit cards.
1. Travel Perks
Anyone who has used a prepaid card while traveling can attest to the many benefits, particularly for those traveling abroad. Although most major credit cards offer exchange rates that don’t fluctuation when you travel, prepaid cards have perfected this feature.
With credit cards, your available credit is converted to the appropriate exchange rate only when you make a purchase, and the cardholder is charged up to 7 percent per conversion. However, with prepaid debit cards, the conversion happens when you load your card. This saves a lot of money by eliminating individual conversions.
In addition to exchange rate perks, prepaid debit cards also come with many of the advantages of credit cards but eliminate interest rates and buyer’s remorse when the credit card statement comes. Some popular prepaid card travel benefits include fraud protection, reimbursement for lost luggage, and the ability to reload while traveling internationally.
2. Small Business Benefits
Though consumers are the majority of prepaid card holders, small business owners have also begun to realize the benefits of these cards. For example, prepaid cards aren't tied to a bank account and cannot be authorized for more than is loaded onto the card. This serves a few significant purposes for the business owner.
First, there is no approval process for prepaid debit cards, so a business owner doesn’t have to worry about being turned down due to limited business credit. Secondly, prepaid cards are a great way to manage expenses and can serve as a way to prevent overspending. Additionally, prepaid debit cards can be given to employees to use for expenses without accessing any of the company's assets.
Business owners have also started using prepaid cards to pay employees in lieu of paper checks. Some prepaid card issuers even offer incentives for employers to switch from traditional payments to prepaid card direct deposits. Employees appreciate the convenience of receiving their wages automatically while eliminating their dependence on bank accounts.
3. Up-to-the-Minute Account Info
Prepaid cardholders can access their card details in a variety of ways. With the advent of mobile app development, most prepaid card issuers have companion smartphone apps. These allow cardholders to get up-to-the-minute account details, transfer money to friends and family, and even initiate reload transactions. Cardholders can also access their card information from any web browser.
4. Robust Fraud and Security Features
As previously mentioned, most branded prepaid cards include security features and fraud protection. By default, prepaid debit cards are a lot more secure than carrying cash, as cash can be easily stolen and nearly impossible to recover.
Many consider prepaid debit cards to be more secure than standard bank-issued cards because they are not connected to a bank account. In the event the card is compromised, you won’t have to worry about a thief draining your bank account. In some cases, prepaid cards are not even tied to your personal data, further enhancing security.
If your card is lost or stolen, prepaid debit cards offer the same protection as other debit cards. Zero liability protection is usually provided for prepaid cards branded by major credit card issuers. This means you will not be held responsible for fraudulent purchases and will be reimbursed for any purchases you didn’t authorize. This protection extends to unauthorized purchases made while traveling as well as online.
5. Budgeting Tools
Prepaid debit cards are one of the most effective budgeting tools available. When you load a prepaid card with a certain amount, there is no way to spend more than is loaded onto the card. This is a great feature for teens and young adults who are just learning to manage money. It gives parents control of the amount loaded and the ability to monitor purchases.
Adults who are trying to get a handle on their spending can also benefit from using prepaid cards. Some have opted to have several cards dedicated to specific categories, much like the envelope budgeting system, but in card form. Separating funds for specific purposes gives the user a clearer picture of where his or her money is going and helps avoid costly overdraft fees.
These are just a few of the many benefits offered by prepaid debit cards. As more consumers become aware of them, their use is likely to expand even more. Whether you’re a business owner looking for a better way to manage expenditures or you’re about to take your first vacation abroad, a prepaid debit card can be one of the best financial tools available.
We just sent you an email. Please click the link in the email to confirm your subscription!
OKSubscriptions powered by Strikingly