What Are the Differences Between Prepaid Card Types & Uses?

Prepaid cards have become widely popular, thanks to their versatility in rewards and various programs. Yet, many people are unaware of the range of prepaid card types and their uses. These cards provide a simple, adaptable payment solution for both individuals and businesses. Convenient? Absolutely. Most cards either fall into open-loop cards or closed-loop cards.

A person can use open-loop prepaid cards nearly anywhere. Closed-loop cards have restrictions on their uses, such as only being usable at specific stores, networks, or services. Understanding how these prepaid cards differ helps ensure you choose the ideal option. Here are some of the most popular types of prepaid cards.

General Purpose Reloadable (GPR) prepaid cards are extremely flexible. These prepaid card types typically load funds from multiple sources, including direct deposits, cash reloads, and bank transfers. GPR cards are ideal for everyday use.

The cardholder owns the funds and can use them with very few restrictions on how to spend their money. These cards can also be either digital or physical. General purpose reloadable cards are ideal gifts because they offer recipients the freedom to purchase what they want and when to reload their card, if necessary.

Additionally, GPR cards can work as effective ways for people to budget who may not have access to banking services. These cards are also reloadable. That’s highly convenient for cardholders because they can reload the same card without needing a new one after one or a few transactions.

These items are the prepaid card types you see on the hooks at various convenience stores. They’re instantly recognizable. These open-loop prepaid cards are not reloadable and typically do not have access to cash. However, they are widely accepted by any merchant within the card’s network. For instance, a prepaid gift card backed by Visa would be acceptable at any vendor that can take Visa payments.

These cards may also have inactivity fees, which help close out the cards as the funds do not expire. These cards rarely allow for a load of more than $1,000. There are no spending restrictions outside of cash access on prepaid gift cards.

In many ways, a payroll card is a prepaid card type that acts very much like a GPR card. The biggest difference is that the cardholder receives a payroll card from an employer. Instead of getting a traditional paycheck or a direct deposit that goes to a bank account, employees can use this type of open-loop prepaid card to access their wages once payday arrives.

Corporate prepaid cards are often issued to employees to cover work-related expenses, such as the costs of traveling, dining, and entertaining clients. This type of closed-loop prepaid card works as an alternative to a corporate credit card or expense reimbursement form.

Travel and expense cards are common prepaid card types and often restrict cash access and spending, limiting the card user to specific areas such as hotels, airlines, and restaurants. The employer typically has access to all purchase activity on these cards. This option also streamlines the process of tracking expenses for companies and their employees. Plus, employers can keep track of all card-related activity, keeping everything above board.

An example of a prepaid card used for benefits purposes is a medical Flexible Spend Account (FSA) card. These funds are heavily regulated and are not true consumer-owned funds. Instead of requiring an individual to submit a reimbursement for an expense, they receive a closed-loop prepaid card, which they can use to purchase the eligible items.

The funds usually expire at the end of the plan year, at which point the consumer loses access to them. It depends on the plan rules. External parties cannot load these types of prepaid cards. Also, any unused funds from benefit cards typically revert to the employer that issued them.

Closed-loop prepaid corporate cards usually have very strict spending limitations and no cash access.

Benefit cards, like prepaid gift cards, don’t let users withdraw cash. This example of a prepaid card lets employers ensure the funds on these cards go toward medication, co-pays, and other pre-approved healthcare-related expenses.

Incentive cards are similar to prepaid gift cards. However, unlike many other prepaid card types, incentive cards are corporate-owned funds. This means the Program Manager gives the cardholder temporary use of the funds for a predetermined period. If the cardholder does not use all the funds on the card by the expiration date, the remaining funds are removed from the card.

Typically, incentive cards don’t allow access to cash and are single-use. Just like with gift cards, the maximum amount on incentive cards is usually restricted to less than $1,000.

To learn more about how different prepaid card types can benefit your organization, our expert team at All Digital Rewards is available to help you build a winning prepaid card strategy. Call today at 866-415-7703 or schedule a demo to speak with our team.