Prepaid

Prepaid refers to payment arrangements in which funds are loaded onto a card or account before use, and subsequent transactions are deducted from the preloaded balance. It is distinct from credit-based payments, where the purchaser borrows funds to be repaid later. Prepaid products range from payment cards to mobile plans and travel or gift cards, and can be broadly categorized by where they operate.

Two main categories of prepaid cards are open-loop and closed-loop. Open-loop prepaid cards bear major network brands (for example Visa or Mastercard) and can be used at merchants that accept the network; closed-loop cards work only at the issuer’s own stores or network. Some prepaid cards are reloadable, allowing multiple funds additions, while others are single-use or have limited reload options. Prepaid accounts may be loaded by cash at retailers, bank transfers, direct deposits, or payroll deductions, and many support features such as direct deposit, ATM access, and online management.

Prepaid products are widely used for budgeting, gifts, travel, and as a tool for people without access to traditional banking. They can offer control over spending, no credit checks, and immediate availability. However, they can carry fees for activation, maintenance, transactions, or inactivity, and protections can vary by jurisdiction and issuer. In many regions, prepaid accounts are subject to consumer protections and, where offered by a bank, may be insured up to applicable limits. As a payment category, prepaid continues to evolve with fintech innovations and regulatory developments.