Are you ready for prepaid cards?

Harjot Kaur 18 October 2012

Prepaid cards can eliminate the risk of carrying cash and can be used for shopping and even money transfer without opening a bank account

Prepaid cards are convenient alternatives to cash and cheques. They are provided by banks even if you do not have an account with that bank and can be used instead of cash and cheques for making payments and even transferring money. Here are some essential details about prepaid cards you may like to keep in mind.

What are prepaid cards?

A prepaid card is a payment card that is preloaded with cash by you or by someone else. It looks like a normal credit/debit card with a card number, signature strip and company

branding material. Unlike a credit card, a prepaid card does not have any credit attached to it and you can use only the amount that the card has been loaded with through pre-payment. It is different from a debit card also, since it is not connected to a bank account, thus you can get it even from a bank where you do not have an account. Depending on the brand of the card, you can use it on counters and outlets which accept these cards. Thus depending on your requirement and area of use, you should pick cards accepted at a wide variety of shopping outlets, ATMs, over the phone, mail orders or internet and cash transfers for maximum benefit since you do not need to has an account with eth bank, you can get these conveniently enough.

How do prepaid cards benefit you?

You do not need to carry cash; the cards are secure. You do not need a credit history since these anyway do not carry a credit line for you. Cards help you budget your money since you have a limit to spend, you cannot land up into an overdraft or overspend. There are no interest charges or validity, so you can spend when you require to at no extra cost for a longer time span of usage. Since there are no repayments to be made, no charges for late repayment and the like, that happens in credit cards. Prepaid cards have a wide acceptability, even wider than credit cards-they can now be used to pay school and college fees as well (provide link). It is as secure to use as a credit/debit card due because same verification processes are used for prepaid cards as well.

What are the offers attached?

Other than the usual prepaid cards, banks and non-financial companies also offer specialised cards with special discounts on chosen purchases, such as travel cards, gift cards and corporate meal cards. Few random examples of which are:-

• The SmartTravel Prepaid card by Standard Chartered Bank which provides you with free cash withdrawals in any MasterCard enabled ATM worldwide, an international SIM card, whose handling charges are waived and you get complimentary talk time as well.

• HDFC Bank Money Plus card is offers you net banking facility for your card where you can keep a track of your expenses and generate statements as well.

• SBI eZ-Pay card can be used to receive various government disbursements such as centre and state scholarships, social benefits like NREGA, Anganwadi staff salary, old age pension etc.

What are the charges involved?

There are various kinds of charges involved such as initial sale fee, reload or renewal fee, annual fee and encashment charges. Some of them may also charge an ATM withdrawal fee and a balance inquiry fee. Miscellaneous charges could include PIN and statement generation charges and card replacement fee.

What are regulations regarding these cards?

According to the latest RBI notification, “The five categories of semi-closed PPIs as indicated in our previous guidelines have been replaced with three broad categories as under:

(i) Prepaid cards can be issued up to Rs10,000 by accepting minimum details of the customer provided the amount outstanding at any point of time does not exceed Rs10,000 and the total value of reloads during any given month also does not exceed Rs10,000. These can be issued only in electronic form.” This means that in case you have purchased this card on 3rd August and spent Rs7,000 by 11th August, you can re-load it only for Rs3,000 and get a total limit of Rs10,000 but not exceeding it.

(ii) Prepaid cards can be issued from Rs10,001 to Rs50,000 by accepting any ‘officially valid document’. Such prepaid cards can be issued only in an electronic form and should be non-reloadable in nature.

(iii) Prepaid cards can be issued up to Rs50,000 with full KYC and can be reloadable in nature.”

Under the domestic money transfer facility, money transfer is allowed:-

(i) From a prepaid card to another prepaid card issued by the same issuer, and

(ii) From a prepaid card issued with full KYC to a bank account up to Rs5,000 with a monthly ceiling of Rs25,000 for the person transferring money.

Final Take

Using prepaid cards instead of cash is much convenient for carrying, management and tracking. Besides you tend to remain within your budget and spend the calculated amount. With wide acceptance, prepaid cards are easy to use.

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