Many years ago, plastic cards like debit, credit, or the best prepaid cards were not available yet. Purchase transactions were mostly paid for in cash. Nowadays, it is nearly impossible to do financial transactions without using some plastic cards like debit, credit, or the best prepaid cards.
Today, most people pay their rents and other services using their plastic cards. They are also used to pay for purchases both through merchants or online. International prepaid cards have also been a constant ally of many avid travelers when they go overseas. The card is accepted by many merchants outside the country.
The Evolution of Prepaid Cards
While many plastic cards are now available in the market, the incomparable prepaid card stands out because of the peerless benefits and convenience they offer. During the era of the Wild West, goods were purchased by pioneers at country stores. The goods are also paid for as soon as they have the money.
Back then, sharecroppers relied primarily on the credit provided by the landowners. The latter provides supplies and food for them. Sharecroppers use a percentage of their harvest to pay for their purchases. This was the main set up during those times between the two parties.
Some years later, a few stores offered credit limits to their customers. Around those times, the 90-day credit account was introduced. With this kind of set up, people can get the item they want and be charged for the purchase. The payment would be provided over a period of 3 months (or 90 days) without interest.
Eventually, this set up led to the development of credit cards. Credit cards can be likened to borrowed money or temporary cash. With credit cards, cardholders can use their cards to pay for services and goods and repay the provider at a later time. If payment is not made on the agreed date, interest charges will be implemented.
After the introduction of credit cards, other innovative plastic cards were also introduced including prepaid cards. Thanks to their enticing benefits and awesome features, prepaid cards have become wildly popular and have become a staple in the hearts and wallets of many consumers.
A study made by the Federal Reserve Payments revealed that a staggering 6 billion transactions were made using prepaid cards. The overall transaction amounted to an impressive $140 billion. Prepaid card usage has also experienced a 20 percent increase through the years and has not shown any signs of slowing down.
The Different Types of Prepaid Cards
Open-System Prepaid Cards
Open-system prepaid cards are usually associated with financial networks that are established. The monetary value of closed-system cards will be issued in the name of the cardholder. The cardholder will be accessed using a card number that is unique and embedded in the magnetic strip of the card.
Closed-System Prepaid Cards
This type of prepaid card can only be used at a single merchant chain or a single merchant.
Gift Cards
Gift cards are the kind of prepaid cards that are non-refundable. They are also considered closed-system cards. Typically, most closed-system cards are also known as stored-value cards.
This means the monetary value of the card will be stored in the card itself. The monetary value will be stored via a small microchip. In addition, there will be no external record of the value of the card available on any payment networks.
