October 30, 2015

Prepaid Cards vs. Reloadable Cards - Know the Difference

How many of us have not seen the gift card and prepaid card stands at the local supermarket? They have become a big part of our culture and are available at most any retail location these days. These cards, preloaded with funds, are now increasingly being used in creative ways across the globe in a variety of ways: 
  • Some companies now use reloadable cards for their staff to manage expenses. 
  • Gift cards are becoming a preferred gift for weddings, birthdays and company events. 
  • Many lower income consumers use prepaid cards to manage funds - and even government agencies use reloadable cards for low income support programs like welfare. 
  • Affiliate payout services like Paxum will use a reloadable card for distribution of funds to the affiliate. 
  • And of course in the recent news, we are seeing an increasing trend with prepaid cards used for discretion and privacy when making an online purchase. 
To serve these individuals, for a number of years now, CCBill has accepted credit cards, debit cards, prepaid cards and reloadable cards with the Visa or MasterCard logo.

Prepaid cards 
Prepaid cards with the Visa or MasterCard logo have a hard, set limit of funds, like a gift card. They are anonymous and can be purchased with limited identification requirements and are generally not tied to a person's bank account.

There are some limitations to be aware of with prepaid cards. 
  • Prepaid cards can only be used with a processor which resides in the same country as the card was issued. They cannot be accepted cross-border due to laws designed to protect from illegal activities like money-laundering or terrorism. Example: a prepaid card issued in the U.S. can only be approved by CCBill when the merchant has a U.S. CCBill account. Cards from the EU would be declined by the bank due as it violates acceptance rules. 

  • Another issue to remember is that prepaid cards have a hard set limit on the card as far as funds available. Someone who may have used a card has already used some funds on that card and may not be able to use it again if there are insufficient funds to authorize – especially if the transaction is recurring – or has a larger preset authorization on the card like some of our merchants do.

  • Another point to keep in mind from a business standpoint, is that many users of prepaid cards will provide bogus and fake personal information during the checkout process, which can impact the approval from the bank, but also impact the quality of the data about your consumers or members.

Reloadable cards 
Reloadable cards have funds assigned or added to them for use. They are often used by parents to provide funds for their kids to use, as noted earlier by a number of companies to distribute funds to their staff or partners.
  • They are generally tied to a bank account, so that the funds can be loaded onto the cards. Or some providers allow you to load funds and a store or kiosk. 
  • These cards are not 'off-the-grid', as they have to be registered and the user identified under law.
  • One main difference from prepaid cards is that the balance can be restored when the funds are reloaded.  
  • One main difference from prepaid cards, is reloadable cards are accepted cross-border and do not carry the same banking restrictions, but compared to regular credit cards, when used for recurring subscriptions, they generally have lesser amounts to authorize.  
There are some outside vendors that provide these cards, such and Greendot and PayPal. In recent news, RushCard ran into technical issues impacting the acceptance of their cards for hundreds of thousands of users as noted in the New York Times. Another thing to keep in mind if you accept these cards which are tied to networks or accounts.

CCBill's systems are able to identify and manage these cards in our system, and due to that ability, we built our exclusive CardsByCountry Web Validate feature, which allows the merchant to control which kind of cards they want to allow and where. allow. Prepaid cards are not always the best choice for every business model, so we provide a function for our merchants to block them, if they chose. 

If you need more info, contact your account manager or our Merchant Support team and they can help you manage this growing option for payments online.