A prepaid card issued by your bank as a payment card. It can be loaded with a specific amount. These cards do not necessarily have to be an external account that a lender retains.
These days, banks also offer prepaid debit cards. These cards are a great alternative to traditional bank accounts. It does not require a saving or current account to be opened with any lender. These cards are issued with a validity period. You can use a prepaid debit card to make payments at merchant establishments. Some banks also issue prepaid debit cards with cash withdrawal facility. As long as a prepaid debit card is valid, you have access to cash in case of an emergency.
In other words, prepaid debit cards work as a combination of a credit card and a savings account. The money spent is deducted from the balance available on the card. You cannot spend beyond the limit of the prepaid debit card. It is a convenient solution for people who do not have access to banking facilities. These cards are one of the fastest growing financial instruments in the market right now.
Prepaid debit cards are also a great alternative to gifting cash on occasions like wedding or birthdays. You cannot directly spend cash online (barring deliveries where cash on delivery option is available). But you can always use this card for online transactions.
Features and Benefits of prepaid cards
There are several benefits of opting for prepaid debit cards. Here are the key benefits provided:
No need to carry cash: These cards are hassle free. As the cards are already loaded with cash amounts, you can directly use prepaid debit cards to purchase various kinds of goods and services. Gone are the days of carrying cash in your wallet.
You can withdraw cash too: Prepaid debit cards also allow cash withdrawal. However, make sure that you have an open looped card. Only these prepaid cards permit cash withdrawals at ATMs.
You can stay within your budget: Prepaid debit cards help you stay within your budget and plan your expenses accordingly. You cannot spend beyond the limit. It allows you to control your expenses and avoid impulse buys.
You can use them almost anything: Prepaid debit cards can be used for a variety of purposes purposes. Planning to order a delicious meal from Swiggy? Use your prepaid card to make the payment.
Ideal for gifting: Loading a prepaid debit card is the best gift if you don’t want to gift cash. It allows your loved ones to choose what they want.
Fees and charges on prepaid debit cards
Prepaid debit cards are often cleverly packaged and marketed. As a result, you may not realise that you are paying a bunch of miscellaneous fees like activation fee, recharge fee, balance enquiry fee etc. This can impact the actual useable amount; your card balance may be lower than promised. Make sure that you read the fine print before you choose prepaid debit cards.
It is also important to remember that not all prepaid debit cards offer the same kind of service. Accordingly, the fees charged are different. Typically, every bank will charge the following types of fees:
Monthly fee: a fixed amount is charged even if you don’t use your card. The fee is deducted from the card balance.
Transaction fee: amount charged when you use the card for any transaction.
Balance enquiry fee: amount charged in case you enquire about the balance available on your card.
Cash reload fee: amount charged when you reload your card.
How to obtain prepaid debit card in India
The eligibility criterion differs depending on the type of prepaid debit card. Cards which are issued for providing allowance to employees or rewarding them for good performance can be obtained by a corporate. In such cases, the KYC of both the employer and the employees who will use the card will have to be submitted. Similarly, if meal cards are issued by an organization, the necessary documents have to be submitted.
In case an individual is applying for a prepaid debit card, the KYC documents are required. Certain banks also request for a passport photo and proof of residential address.
Banks also provide the option of applying for these cards online. You need to log on to the website and click the ‘apply online’option. If you are looking to obtain bulk quantities (such as meal cards for employees), contact the relationship manager or email the bank. In case of individuals, you can complete the process online and submit your documents. Some banks may require a physical verification of the KYC documents submitted.
You have the option of choosing between two types of prepaid debit cards:
Reloadable prepaid cards: You can keep adding money to the reloadable card even after you have exhausted or used up your balance. A forex card is a great example of a reloadable prepaid card. In fact, you can load your forex cards in various currencies too.
Non-reloadable prepaid cards: These types of cards are meant for single use only. You cannot add any extra money after you have exhausted the balance in the card.
Top banks providing prepaid debit cards in India
A number of public and private sector banks provide prepaid debit cards in India. Each bank also offers variants of prepaid debit cards depending on the purpose. Here are the top banks which issue prepaid cards:
State Bank of India
SBI offers a variety of prepaid debit cards in India. These are customized as per the need of the applicant. The most popular cards are:
State Bank Smart Payout Card
State Bank Achiever Card.
State Bank Xpress Money Card
ICICI bank offers a large variety of prepaid cards. These include gift card, travel card, meal cards etc. The bank also offers pockets card. These are digital wallet cards which can be loaded through internet banking or a debit card. Pockets card are now a days a very popular prepaid credit cards are popular and widely accepted. It can be used for DTH and mobiles recharge, sending gifts and money, bill payments, buying movie tickets etc.
Some of the other popular prepaid cards issued by ICICI include:
-Pockets/ Digital bank
-Saral Money Prepaid Card
-Indian Rupee Travel Card,
Another player issuing prepaid debit cards in India is HDFC Bank. Like its competitors, it offers multiple varieties of prepaid debit cards tailored to the needs of the customers. HDFC Bank Forex-Plus is a prepaid card which is very popular with international travellers. This card can be reloaded during travel. It can be used for net banking as well. Other popular prepaid cards issued by HDFC Bank include:
-Multicurrency Platinum Forex-Plus Chip Card,
-ISIC Student ID Forex-Plus Chip Card,
-Forex-Plus Platinum Card
-Forex-Plus Chip Card
-Apollo Medical Benefit Card.
What are the risks associated with prepaid debit cards?
Each coin has a flip side. While prepaid cards offer a lot of advantages, it is important to be aware of the risks. Some of the key risks are:
-When it comes to money, losses and thefts are considered as inherent risks. Prepaid debit cards are also not immune to this risk.
-It is important to keep your card details discreet. If you share details of your card with anyone, they may misuse it.
-The terms for consumer protection rights are not mentioned clearly on prepaid cards and consumers may lose money. Therefore, it is better to purchase these cards from recognized financial institutions.
-You should know the validity period of your card before you make the purchase. Make sure you find out the locations where you can use the cards.
-You should be aware of the recovery procedure in case your card is stolen or lost. You also need to find out of your card comes with liability protection in case of loss or theft.
What are the different types of prepaid cards issued in India?
In India, you can purchase any of the following prepaid cards:
Open looped cards: These are considered as open system card or network branded cards. Such cards are issued by banks. These cards look similar to your debit and credit cards. The card bears the logo of the issuer. Open looped cards are easily accepted at several locations which are approved by banks.
Semi-open looped cards: These are called hybrid cards. Semi-open looped cards are generally accepted by a wide range of merchants. A classic example of these cards are cards issued by shopping malls such as Lifestyle, Westside, Croma and similar retail chains which operate at various locations.Closed loop cards:
Closed loop cards are accepted only in specific locations. They are generally issued by merchants for the purchase of various types of goods and services at their outlets. Gift cards are one of the best examples of closed loop cards. You could load a certain amount on a closed loop card and send it to your loved ones who can use it to shop on various retail and online stores.