24 Apr 2017 15:48 IST

Going cashless with prepaid cards

Even those without a bank account can swipe a card and enjoy many benefits

Going cashless isn’t limited to using a debit or credit card. You can also use pre-paid cards. Besides making transactions hassle-free, these cards are convenient and can get you benefits such as loyalty points, merchant discounts, etc, even without a bank account or credit history.

You can also monitor expenses and limit spending with a pre-loaded amount. What’s more, the cards are safe, as access is protected by a PIN and the card can be replaced on request, if lost or stolen.

Usage terms

Prepaid cards are funded by paying upfront. They can be physical or digital cards and can be issued by banks or non-bank entities.

Cards issued by banks can be used to withdraw cash from an ATM, for purchase of goods and services at point of sale (POS)/e-commerce (online purchase) transactions and for domestic fund transfer. You do not need an account with the issuing bank.

Cards from authorised non-bank entities cannot be used to withdraw cash or for use outside India. Sodexo cards used for paying for meals are an example of this kind.

The maximum value that can be stored in any prepaid card is ₹50,000. The limit on the physical card is restricted to ₹10,000 where partial ‘know your customer’ or KYC (only ID proof) obligations are fulfilled.

Digital cards normally have a limit of ₹10,000 but the limit can move up to ₹50,000 for non-reloadable versions, with an officially valid KYC (ID and address proof).

Card types

One common use of pre-paid card is for gifting. Besides cards that are restricted to specific vendors, you can also get generic ones from banks; these cards are valid wherever credit or debit cards are accepted. Many banks offer these gift cards. Digital gift cards are also popular. The pre-loaded amount can be as low as ₹100.

Prepaid travel cards, loaded with foreign currency, are another popular category. On such cards, you can get exchange rate comparable with international debit or credit card. You can also withdraw cash abroad using these cards. To book a train ticket online, you can use the IRCTC’s RuPay pre-paid card, offered in partnership with Union Bank of India and RuPay. There are no transaction charges for the first six months and you can make five bookings per card every month. After this period, you pay ₹10 for every booking.

The card offers accident insurance of ₹2 lakh to card-holders with full KYC. Card-holders are also eligible for reward points on each transaction, as with any RuPay credit and debit card users. The card (physical or digital) can be reloaded any time with a minimum top-up of ₹500.

Costs and restrictions

Corporate payments such as tax-free meal voucher (up to ₹2,500 per month) to each employee through prepaid cards is also popular. Authorised card providers also provide offers and deals from partner merchants.

Physical gift cards from banks typically cost around ₹100 and digital ones about ₹20. IRCTC’s virtual prepaid card is free and the physical one costs ₹50.

There are other charges for services. For example, ICICI Bank charges ₹199 plus taxes for a replacement card. SBI charges ₹100 to refund the balance to the purchaser. However, if the balance is less than ₹500, the amount is forfeited.

You also have to keep track of card expiry. IRCTC’s virtual card is valid for one year. Validity on the physical card can be extended to three years by doing a full KYC. Digital gift cards from multiple vendors can be managed with apps, which may give you reminders such as on card expiry. Meal card balances typically expire at financial year end and may not roll over to the next year.

Ramki Gaddipati, co-founder and CTO, Zeta, says that gift cards do not permit cash withdrawal or transfer of funds to other users. Likewise, meal cards are meant for purchase of food and non-alcoholic beverages only and are restricted to outlets that sell food; corporates may impose other conditions on usage.

(The article first appeared in The Hindu BusinessLine.)

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