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Advantages of prepaid cards

advantages prepaid

Prepaid credit cards are similar to gift cards - the user or a purchaser can load a certain amount of money on the card at a cash register in a grocery store, a pharmacy, gas station or other similar stores. This transaction is anonymous.

The payment process is an uncomplicated process when compared to other methods such as by credit card, as there is no possibility of chargeback after the payment is processed.

Because prepaid cards have only a certain amount of money loaded onto the account, fraudulent payments are not possible. Certain prepaid cards cannot be loaded past a certain limit.

This method is optimal for minors, as they cannot pay with credit cards and often have no bank account.

Expiration of payment

In order to pay with a prepaid card, the customer must first buy a card and then load the desired amount of money onto the card. The value loaded onto the card is often offered in amounts of 5, 10, 25 or 50 euro.

When the card has an amount loaded onto it, the cardholder can use it to go shopping. During the payment process on online shops, the user must choose the prepaid card provider option and enter the information and PIN of the card into the online formula. The card is then checked for value and if approved, the amount is subtracted from the total value of the card and the order is confirmed.

Disadvantages of prepaid cards

disadvantages prepaid

Although there are some clear advantages to prepaid cards, there are also a fw negative sides that should be discussed. The main disadvantage is the high fees in the payment process that can amount up to anywhere from 8 to 15% of the revenue. Another disadvantage is the amount limit on the card that prevents money laundering schemes.

There is no way to check the age of a customer that uses a prepaid card. Minors are able to purchase certain products that are meant for adults over 18, which is also a problem for certain online shops.

A further disadvantage is the small amount of payment service providers that offer to process prepaid cards at a global level. Retailers must adjust to the desired payment provider depending on which countries they conduct business and cross-border transactions in.

In Germany, the use of prepaid cards is very limited. They are mostly used to purchase digital products and are a good alternative to micropayments.

PSPs and prepaid card payment - and what to watch out for

Compared to other payment methods, the amount of PSPs that process prepaid card payment is small. E-Commerce is only successful when the online shop offers payment methods that cover the largest amount of customers in as many different targeted regions possible.

As providers offer low limits in Germany, it would be beneficial to look across international borders. Depending on the cross-border activity of a shop, a retailer may find more possibilities there.

Prepaid cards - cash-free cash

While credit cards are common for customers with strong credit scores, prepaid cards offer a special solution for customers with weak credit scores. Prepaid cards function similarly to cash - the customer must have the amount at hand in order to use it to purchase products. This means that this is risk free and profitable for banks.

The prepaid card are indeed risk-free and practical for users, but they come at a high price. Therefore, it is important to compare the PSPs that offer prepaid card payments in different industries and focus on what they specialize in.

Get informed about the choice of PSPs

PayLife, Paysafecard, CASHU and Postepay - the amount of PSPs that offer processing for prepaid cards is much smaller when compared to PSPs that process credit cards and other methods of payment, yet the providers still offer different fees and conditions. Which prepaid payment option is the best for your online shop? Which payment methods are the most popular in your industry? What does cross-border business look like for your business?

When choosing the right PSP, you will encounter many questions. Find the most important information about payment service providers at Paylobby and discover the best solution for all of your online payment processing concerns.

Here you’ll find the best providers for prepaid card payment processing.


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