Busting the Myths about Prepaid Cards
The rise of new technology can cause a furor among some members of the general public, at least initially. To the uninitiated, new technology seems too good to be true, for we have been indoctrinated to view simple, game-changing solutions with distrust. “It has to be a scam,” people will scoff, “for how can it be this easy?”
Cashless payment solutions such as debit or credit cards have been around since the mid-1960s, with an estimated 80 percent and 89 percent of the Canadian population currently using them for everyday purchases, respectively. Likewise, gift cards and single-purpose (aka closed-loop) cards have seen widespread use by the general population since the early 1990s. On the other hand, prepaid, open-loop cards are a newer invention, only making an appearance in the United States at the turn of the millennium. Naturally, misconceptions, myths, and outright falsehoods have been created about this relatively new and decidedly advantageous technology.
It’s time to put do our best Adam Savage and Jamie Hyneman impersonations and bust the myths surrounding electronic payments and prepaid solutions. Here are a few common misconceptions, and the actual reality of the situation:
MYTH: Prepaid cards are insecure and prone to security breaches.
TRUTH: Electronic payments have never been safer, and using a prepaid card is much more secure than paying with cash. As well, if your card is stolen you do not run the risk of losing everything in your bank account or damaging your credit. With online shopping becoming more and more popular, prepaid offers consumers a safe and convenient payment method.
MYTH: Only people without bank accounts use prepaid cards.
TRUTH: According to a research study performed by MasterCard, 68 percent of prepaid users have a chequing account. Among millennials, the Federal Reserve Bank of Philadelphia estimates that 90 percent of prepaid cardholders use traditional banking products.
MYTH: Prepaid solutions are for people with low income.
TRUTH: In reality, the groups that have seen the largest increase in prepaid ownership in the last few years are actually in the highest income brackets. More than one-third of cardholders earning $100,000+ a year said that their usage of prepaid would increase in the future.
MYTH: Prepaid cards are only for people with debts and bad financial management.
TRUTH: According to a study by IPSOS and Mastercard, 73 percent of consumers believe that prepaid could prevent them from going into debt. Canadian Prepaid Providers Organization found that 82 percent of Canadians want payment cards that avoid overdraft or interest charges.
MYTH: Only a few places accept prepaid cards.
TRUTH: Prepaid cards can be used at ATMs, online, in store, and anywhere that MasterCard or Visa is accepted.
MYTH: You must have good credit to get a prepaid credit card.
TRUTH: Unlike your typical credit card, with a prepaid card you are not actually borrowing any money. Instead you load your prepaid card with money you already have, so you do not need to have credit.
MYTH: Prepaid cards are expensive.
TRUTH: Typically, prepaid card fees are actually lower than the cost of maintaining a traditional checking account, and prepaid cards do not require you to maintain a minimum balance in order to avoid monthly fees.
MYTH: My spending data and information is shared with other companies.
TRUTH: All date is encrypted and cannot be traced back to you. TruCash will never give your details to a third-party.
MYTH: You lose your money if you lose your card.
TRUTH: If you lose your card, simply reapply for a replacement—your card balance stays the same.
MYTH: Prepaid is just a fad.
TRUTH: Open loop prepaid cards are the fastest-growing form of electronic payment in the U.S., reaching $200,000,000,000 in merchant spending in 2014.