Last Updated on November 28, 2025
Prepaid cards are issued by banks and financial institutions for physical or virtual transactions. They come loaded with a predetermined sum of money. Customers can use only the money loaded on the card to make purchases.
If numbers are anything to go by, the global prepaid card market looks promising – it is expected to grow at 18.2% CAGR between 2021 to 2030, reaching $6.87 trillion by 2030.
Since prepaid cards allow control over spending, they have unique benefits and have brought a fresh approach to how individuals manage money.
How are Prepaid Cards Different from Credit/Debit Cards?
Debit cards are always linked to a bank account. Cardholders can access all funds in their bank account through a debit card.
A credit card allows users to access a line of credit. Cardholders can take credit from the bank and repay on the agreed terms of the bank.
Meanwhile, prepaid cards allow users access only to the amount of money loaded on their cards. They does not involve borrowing (like a credit card) or accessing funds from a bank account.
Types of Prepaid Cards
Prepaid Cards are primarily of two types:
- Open Loop Cards
- Closed Loop Cards
1. Open Loop Cards
Open-loop cards are branded with the card network they are a part of. They carry the affiliate’s brand logo, and banks issue such cards in association with Visa, MasterCard, or American Express.
2. Closed Loop Cards
Closed-loop cards are restricted to specific outlets and merchants. These are typically used as gift cards by corporates (to encourage purchases at their outlets).
Benefits of Prepaid Cards
Prepaid cards have proved to be a useful electronic means of payment, without the need to link payments to debit or credit accounts.
The prepaid card model serves several benefits:
1. Keeps Spending in Check
Prepaid cards allow users to limit their spending. Businesses are known to use them for their employees on business travels or for health cards. In addition, gift cards, student cards, and even health cards can use the prepaid model.
2. Secure & Easy to Use
Prepaid cards offer a safer alternative than carrying cash. They are easy to load through bank accounts or direct deposit. Hence, companies prefer such cards for disbursing incentives or for employees on business travels.
3. Credit Check Not Required
Prepaid cards do not require a customer’s credit score and background. Hence, it is a valuable option for individuals who do not have easy access to credit.
4. Substitute for Cash
For a consumer, Prepaid cards are a helpful substitute for cash. A single card is easier to carry and use than a bundle of cash.
Limitations for Prepaid Cards
While prepaid cards serve a lot of benefits, they have certain limitations.
1. Credit Score & Security
While prepaid cards allow easy access to funds, they are not a form of credit and do not count towards or improve your credit score. In addition, they do not include all the checks and balances of a regular credit card, making it a lesser secure means of payment.
2. Lack of Access to Banking Services
Unlike credit or debit cards, prepaid cards do not give customers access to other banking services. The usage is limited to the withdrawal and deposit of funds in the account, only to the amount loaded on the cards.
Conclusion
The prepaid card market is expected to grow significantly in the coming years between 2023 to 2030. Initially, these cards were targeted towards individuals with less access to traditional banking. However, over time these cards have appealed to a larger audience. Some key factors affecting this change are increasing demand for cash alternatives, easier access to credit, the number of internet users, and others.
Prepaid cards are especially helpful for college students, young adults, and those who have trouble accessing credit from banks. Because they allow only limited credit, they are a helpful way of building healthy financial habits with consumers.
Contact us today to learn how ISAC can help in your card issuance journey.
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