The introduction of internet technology
in banking sector is expected to boost the demand for cashless
transaction among banking customers. However, a large number of banking
customers are using cash and traditional banking products such as
cheques and demand draft instead of credit and debit cards for daily
financial transaction. This is due to the fear of hidden cost and
convenience issue associated with cashless payment cards. The banking
sector is trying to overcome these issues through offering prepaid
credit cards.
Prepaid credit card
looks similar to a credit or debit card with a card number, brand and
signature field on it. A prepaid credit card is issued by a financial
institution and performs the functions of a credit card except that a
certain amount needs to be preloaded in account. The card holder can use
the card for purchasing items till the preloaded amount gets finished.
Prepaid credit card limits the borrowing of funds from the financial
institution after preloaded amount is finished. The issuing of prepaid
credit card does not require bank account of the card holder. Instead
the amount is stored in a temporary bank account till the amount is
fully used. This factor is expected to boost the adoption of prepaid
credit card for non bank account customers in coming years.
Financial institutions are enabling use
of prepaid credit card in automated teller machine (ATM) and point of
sale (POS) terminals. If the card gets stolen or damaged, the
institution is able to issue new card on basic customer information. The
remaining amount in previous card gets transferred into new card
automatically. Prepaid credit card eliminates the fee and interest
associated with normal credit cards. Thus, the customers don’t have to
worry about the risk associated with hidden costs in use of credit
cards. Prepaid credit cards are available in various forms in market
depending upon the type of application. Gift cards are the most commonly
used prepaid credit card available in market.
The customer is able to use the gift
card for purchasing the items in market through POS terminal or online
shopping. Meal cards offer convenience of providing meal allowance
through prepaid credit card platform. Payroll card is another type of
prepaid credit card which allows an enterprise to pay salaries,
incentives and reimbursements to the employees. The enterprise is able
to credit the monthly salary for every month in the employee’s temporary
account. Financial institutions are now providing forex, travelling and
reward card depending upon the customer’s requirement.
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The prepaid credit card finds its
application among young adults, college students and old age people.
Prepaid credit card eliminates the need of carrying cash which help the
young and college students to carry equivalent amount of cash in form of
a plastic card. The parents can also track the amount spend from the
card time to time.
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