Terms You Should Know When Launching a Prepaid Program

prepaid program

When launching a prepaid program, it’s important to know the terms associated with prepaid cards. Not knowing these terms can cause confusion, making it harder for you to choose and launch the appropriate program for your company. Here are some of the most important terms pertaining to the prepaid card industry:

Tolerance
A tolerance is an extra amount temporarily charged to your prepaid card to account for tips at places such as restaurants, bars, and salons (places that typically have added gratuities for the service received). The tolerance amount could account for up to an extra 20% on your bill.

For example, if your prepaid card is loaded with $30 dollars and your restaurant bill is $29.50, chances are your card will be declined, since it wouldn’t have enough funds to cover the tip. A tolerance does not apply to other merchants, such as retail or grocery stores.

Card Limits
Prepaid cards are limited to the amount of money you deposit on them. Prepaid cards work like debit cards since you are using your own money and not the bank’s (as a credit card would). However, prepaid cards do not have overdraft, which means you cannot spend beyond what is on the card.

The amount you can load on the prepaid card also has a limit; the amount depends on the prepaid card provider. Prepaid card limits may include:

– Maximum balance amount
– Maximum/minimum load amount
– Maximum daily POS purchase amount
– Maximum daily ATM withdrawal amount

Prepaid Card Funding
There are several different ways to fund prepaid cards. Some cards are loaded by the card owner themselves, while others are loaded by an employer, business, merchant, or government agency. Depending on the card, funds can either be loaded on the card once (single load); others can be loaded on an ongoing basis (reloadable). Reloadable cards, and single load cards that exceed a certain amount, generally require cardholder information as well as adherence to certain bank regulations.

Open-loop Prepaid Cards
An open-loop card allows the recipient to make purchases anywhere Visa® or Mastercard® is accepted, both online and in-store. Open-loop cards are loaded electronically and they are great for any kind of purchase.

Benefits of Open-loop Cards:
– Great budgeting tool
– Cards are customizable
– No bank account required
– Works similarly to debit/credit card
– Flexible, cost-effective, and secure
– Cards are universally accepted
– Can be reloaded as needed

Closed-loop Prepaid Cards
A closed-loop card is preloaded with funds to be used at a specified company or location, and sometimes for specific purchases. It’s also sometimes called a “single purpose card” because it’s designed to be used for specific purchases, as opposed to general purpose payments. For this reason, it is not necessarily attached to a payment network, such as Visa or Mastercard.

Benefits of a Closed-loop Card:
– Simple to use
– Safer than cheques, cash or coupons
– Customizable company branding
– No bank account required
– Some closed-loop programs are reloadable

Branded and Non-Branded
Prepaid cards can either be branded or non-branded. Branded cards are customized to match the client’s preferred branding. They include a company logo—or other design features or messaging pertaining to the brand—printed on the card.

Non-branded prepaid cards have a standard design. In other words, they don’t include the client’s logo or other branding features. However, the client can personalize the card by having their name embossed on the card.

Network/Non-Network Branded Cards
Prepaid cards can be either network branded or non-network branded. Reloadable, open-loop programs are network branded and have the payment network’s logo (e.g. MasterCard or Visa) printed on the card. Closed-loop programs, such as prepaid gift cards, can be non-network branded and do not include the payment network logo.

Have questions or looking to learn more about prepaid cards? Feel free to contact us by visiting our contact page. DCR offers you years of experience and expertise prepaid card solutions—from the launching stage all the way through fulfillment and program management.

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