Legal Definitions - prepaid card

A prepaid card is a payment card that has a specific amount of money loaded onto it in advance by the user or a third party. Unlike a debit card, it is not linked to a bank account, and unlike a credit card, it does not allow the user to borrow money. The funds available on the card are limited to the amount that has been pre-loaded, and once those funds are spent, the card cannot be used again unless it is a reloadable type. These cards are often used for budgeting, gifts, or for individuals who may not have traditional bank accounts.

Here are some examples illustrating the use of a prepaid card:

• Scenario: Managing a weekly budget.

  Maria wants to ensure she doesn't overspend on entertainment each month. She decides to load $150 onto a general-purpose reloadable prepaid card at the beginning of the month. She uses this card for movie tickets, streaming subscriptions, and dining out. Once the $150 is depleted, she knows she has reached her entertainment limit for the month.

  This illustrates a prepaid card because Maria funds the card with a specific amount of money *before* she uses it, and her spending is strictly limited to that pre-loaded amount, helping her manage her budget without linking to a bank account or credit line.

• Scenario: Corporate employee rewards.

  A company wants to give its employees a holiday bonus that can be used flexibly. Instead of cash, they distribute $100 prepaid gift cards that are accepted wherever major credit cards are, but are not tied to any specific bank or credit account.

  This is a prepaid card because the company loaded a set amount of money onto the card for the employees to use, and the employees can only spend up to that pre-loaded value. It functions as a payment method without requiring a bank account or credit check for the recipient.

• Scenario: Providing funds for a student studying abroad.

  A parent wants to provide their child, who is studying in another country, with a secure way to access funds without giving them direct access to their personal bank account. They regularly load a fixed amount of money onto a travel-specific prepaid card for their child's living expenses.

  This demonstrates a prepaid card because the parent funds the card with a specific amount of money *before* the child uses it, and the child can only spend the amount that has been loaded onto it. It offers a controlled and secure way to manage expenses internationally.