Prepaid Cards Seldom Reloaded

Prepaid Cards Seldom Reloaded

Prepaid cards for general use have been marketed with the idea that the cards could be reloaded. 

But, according to Mercator Advisory Group, many people who have the cards were not aware that the cards were reloadable.  And even if people knew the cards could be reloaded, only 11% of card holders had ever reloaded the cards.

Mercator estimates 79.7 million consumers don’t know about open-loop, or network branded, reload capabilities.  Banks, processors and merchants are keen to change that because reloads on prepaid cards can generate big profits.  Prepaid cards are most often reloaded at retail stores or at online bank sites.  .

The most common use of general purpose open loop card is for gift giving. Gifts accounted for 87% of card purchases.  Only 14% of card purchasers used a prepaid card for household-expense management in the past year.

Most users simply throw away the cards when funds are depleted rather than reloading the card.

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Branded Prepaid Cards Dominate

According to researcher Mercator Advisory Group, the load volume on open-loop, also called general-purpose or network branded, prepaid cards will surpass load volume on closed-loop cards by 2012.

In its sixth annual prepaid card Mercator said users loaded $187.2 billion onto closed-loop cards last year, up 4.3% from 2007’s load of $179.6 billion. Mercator estimated that network-branded prepaid cards offered by banks and payment processors had a 2008 load value of $60.4 billion, up 48.5% from $40.7 billion in 2007.

Network branded cards provided by government agencies to disperse funds from various entitlement programs showed strong growth. For example, the U.S. Treasury Department’s new program to pay Social Security benefits to unbanked or under banked via pre-paid cards resulted in $1.2 billion being loaded onto the cards last year and forecasts are for $7 billion in 2009. Load volume on unemployment-insurance prepaid cards was $5.9 billion last year and will rise to $11.2 billion for 2009.

Closed loop cards are still strong in some markets. For instance, load volume on digital media cards grew 24%; consumer incentive cards, 19.3%, and petroleum cards, 23.2%.

ACH payments are one way to load a prepaid card.

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