Mostly when there’s a mention of plastic money, people usually think of it as a credit card. However this is not the reality as credit cards are not the only type of plastic money out there. Prepaid debit cards also exist and can be really great tools for managing your expenses along with helping you save money as well. This write up deals with letting our readers know what a prepaid card is, how prepaid cards work and are prepaid cards suitable for you or not?
So what is a prepaid debit card?
A prepaid card is a banking card that lets you pay for your purchases as you would do with any debit card. You can use it at POS (Point of sales) as well as at ATMs to get cash. Prepaid cards are available on the MasterCard as well as VISA payment networks. Due to its prepaid nature, it’s also known as a reloadable/rechargeable debit card. It’s a safer and convenient payment method as opposed to cash which carries risk of theft and loss. To get a prepaid card you don’t need to open a formal bank account, however all the transactions are recorded through the card provider i.e. a bank. Unlike a regular debit card though, you can only spend as much money as you put in the card’s transaction account. In comparison to credit cards or regular debit cards, you pay before when you recharge your card and spend later, whereas in credit cards you spend before and pay later which is essentially borrowing money from the bank and you’re subject to various charges and interest in case you don’t pay off your bills on time. In debit cards you are paying at the moment of spending and money is deducted from the account associated with the debit card in real time by your bank/card provider.
Who’s the right audience for a prepaid debit card?
Prepaid cards benefit those the most who don’t have a bank account or don’t wish to have one. It could be a student planning to pay his tuition and examination fee online, or a corporate organization that’s planning to disburse bonuses, or as gift cards to be spent on shopping or dining. For those who have a bank account, prepaid debit cards can still be feasible and a great tool for money management as you can make expenditures without the worry of overspending from your account. Also since it’s your own money that you’re spending hence you’re not landing into the trouble of having to pay heavy interests. This is useful for people who have a fixed income, students and teenagers who get allowances or people visiting from abroad who temporarily wish to use a debit card.
Features of prepaid debit card:
Prepaid cards come with various features and benefits. For starters, due to the prepaid nature, there are multiple ways of recharging a card, usually by doing cash or cheque deposit at the bank or making an online transfer if you have an account in the same bank. You also get ATM withdrawal facility with a prepaid debit card. Another thing to note is that these cards are issued instantly and there’s no waiting times like there are usually with credit cards due to their checks regarding applicant’s credit history. While there are certain charges attached to using prepaid cards such as out of network ATM withdrawal or online usage, some charges are not levied or waived off altogether such as activation or transaction fee. These cards also don’t have a renewal fee as once expired you are issued a new card if you need one.
Limitations of prepaid cards:
With all the advantages that prepaid cards come with, there are several limitations that such solutions carry as well with them. The most obvious of them is that there is a certain recharge limit and your card cannot hold more cash than that whereas a debit card linked to your bank account will have access to all of the funds available in your bank account. Also there’s a certain spending limit per day and once you cross it your car remains unusable till the date on the calendar moves a notch ahead. The next disadvantage is that these cards are not as secure as credit cards and thus cannot guarantee fraud protections. Even if your bank offers you purchase protection, it might be difficult to get refunds, correct errors and reverse wrong transactions. Some more limitations are no access to online banking or funds transfer and no cheque book.
Who’s offering prepaid debit cards in Pakistan?
Currently, only United Bank Limited (UBL) is offering prepaid debit cards in Pakistan under the UBL Wiz brand. It offers various types of cards for people with specific needs such as UBL Wiz Internet card for those who like to spend online or UBL Wiz ACCA card for students who wish to pay their tuition and exam fee to ACCA in UK. There are also cards for teens, ladies and travelers which have different spending, reload and deposit limits. All you need to get a Wiz card is your CNIC and teens can get one if their guardian gets it on their behalf. A person can have one card of each type at a single time on his/her CNIC. Recently State Bank of Pakistan (SBP) has issued regulations regarding the issuance and usage of prepaid cards which will hopefully urge more banks to start offering such solutions for the unbanked population of Pakistan.
We hope that this article serves in the benefit of those who are looking for a way to try out banking practices without actually going through the hassle of opening up a proper bank account. If you have any queries please let us know in the comments section below!