More and more consumers are using prepaid cards as an online payment method. Indeed, global transactions with prepaid cards are expected to reach $3.98 trillion in 2028, up 650% from an already impressive $529 billion in 2023.
British Juniper Research bases its projections on the card’s appeal for the unbanked, offering financial inclusion with just a few clicks and without needing an account with a financial institution.
Already, general-purpose reloadable prepaid debit cards provide an alternative to cash for the 20% of Americans who are underbanked, according to market research publisher Packaged Facts.
With this massive adoption of prepaid cards among un and underbanked, you'd expect transactions to go smoothly. But in reality, prepaid cards frequently fail or get declined during online purchases.
This can lead to abandoned shopping carts, lost sales, and frustrated customers. As a card provider or company integrating prepaid card services, failed transactions can quickly add up, damaging revenue and reputation.
Declined prepaid cards are a headache you want to avoid.
We list the 9 reasons customers ask “Why is my prepaid card not working online?” and share how you can troubleshoot and prevent failed payments.
Learn more about leveraging prepaid cards to elevate your business. Berkeley Payment provides turnkey solutions for launching white-label cards via a simple, unified platform.
Top reasons why prepaid cards get declined online
When purchasing online, prepaid card transactions can unexpectedly fail. Before you know it, frustrated customers flood a company’s inbox asking “Why does my prepaid card keep getting declined?”
Let’s take a step back and consider the possible reasons for a failed online payment versus in-store.
As it turns out, some of the top reasons for payment declines are easily fixed. When surveyed by PYMNTS, a publisher covering payments and commerce, 30% of the respondents indicated they entered incorrect payment information.
Source: PYMNTS
However, the report includes payments with credit cards, debit cards, and prepaid cards. Unlike credit cards with revolving credit limits, or bank-linked debit cards, prepaid cards contain a fixed amount of card funds that get depleted as you spend.
This key difference leads to some of the top reasons prepaid cards get declined for online purchases. Let’s look at the top 9 reasons prepaid card payments fail (in random order):
1. There isn’t enough money on the card
With a prepaid card, you need to know your balance before spending to avoid declines due to low funds. For example, if you have $4.27 on your prepaid card, but try to buy a $5 item, the transaction will fail since the card balance is insufficient.
Again, this differs from credit cards and debit cards, which are linked to credit limits or bank accounts with overdraft protection.
In this scenario, prepaid card users should ask the merchant to charge exactly $4.27 to the card, and pay the remaining $0.73 with another payment method, like cash.
In some cases, the merchant can see what the balance is on a card and will ask if the customer has other ways of covering the missing $0.73 (called "Partial Authorization") but in most cases, they cannot.
Customers can find out what their card fund is by using a phone app. Alternatively, they can visit the website listed on the back of the card, or call the phone number on the back of your card.
2. Incorrect payment information entered
Even if your prepaid card has sufficient funds, entering incorrect payment details during online checkout will result in a declined transaction.
When paying online, prepaid card users must accurately input the 16-digit card number, 4-digit CVV code, expiration date, and billing zip code associated with the card.
Entering any piece of card information incorrectly or leaving a required field blank will lead to instant denial when you click “Pay Now” during checkout.
If you’re asking yourself, “Why is my prepaid card not working?”, double-checking if you correctly typed in all prepaid card digits and characters is crucial before submitting payment.
Small mistakes like transposing two numbers or mistyping your zip code will lead to headaches and hassles if your transaction gets declined.
Additionally, some users may be wondering, “Why is my prepaid card not working online?” after they entered their personal billing details instead of the information associated with the card.
When paying online, card users must enter the cardholder name and billing address tied to that specific card.
For card providers, it’s important to note that clear, customized card design is essential to help clients fill out prepaid card details correctly during online checkouts.
3. Payment refusal due to security measures
According to safety reviewer security.org, 65 percent of people with credit or debit cards have experienced credit card fraud at least once in 2022.
Source: security.org
To prevent this kind of fraud, some online retailers use fraud protection software that flags certain kinds of prepaid card transactions.
Sometimes the issue occurs with gift cards bought in-store or reward cards that have no cardholder name, only a gift card number. The gift card being anonymous triggers security measures to automatically decline the payment to prevent potential misuse of lost or stolen cards.
Another often occurring issue with fraud detection concerns recurring payments, though this can depend on the card company and the specific conditions set by the card provider.
Of course, merchants have legitimate reasons to be vigilant about prepaid card fraud. Online card fraud does happen, even with rigorous security measures in place.
So why does my prepaid card keep getting declined due to security measures?
Try contacting the card provider or the card issuer directly to help identify if it’s an inadvertent fraud block. Card issuers can then unblock your card and add notes to prevent future payment refusals.
4. Prepaid cards can have restricted access functionality
Some prepaid cards have usage restrictions that can also lead to unexpected declines. That’s because these cards can be customized and branded to create unique prepaid cards that fit businesses.
For example, a prepaid gas station card may only allow purchases from specific fuel retailers encoded on the card by the issuer. Using it elsewhere results in denials during checkout.
Before shopping online, card users should be aware of restrictions set on their prepaid card – especially if the card is provided for a specific use.
Businesses using prepaid cards as a service should communicate restrictions, and provide documentation and FAQs to confirm where and how cards can be used. Restrictions are typically printed on the card packaging or terms and conditions.
5. The card may have expired
Similar to credit cards or Visa debit cards, prepaid cards have expiry dates printed on the front of the card. But because these preloaded cards can have different features depending on the card company, expiration policies vary.
Some cannot be reissued, as often is the case when a gift card balance expires. Some gift cards never expire, like the Amazon gift card, while physical Vanilla Visa gift cards expire but their balance doesn’t.
When checking why your Visa gift card was declined, make sure to check the expiration date and policy.
Other types of cards (like most corporate reloadable cards) are automatically re-issued to the cardholder once they expire, and the funds never expire.
Besides, digital prepaid cards can often be instantly issued so that clients don’t have to wait for a new physical card to arrive.
To prevent expiration issues, card providers need to communicate expiration policies, and provide documentation and FAQs.
6. The prepaid card may need to be activated
Most prepaid cards need to be activated before they can be used. Activation instructions will often be on the card or inside the card package.
Usually, you can activate a card by calling the phone number on the back of your card or visiting the website on the back of the card.
Card providers should seamlessly integrate card activation with their services and communication to ensure clients do not face payment denial due to the card being inactive.
7. Prepaid Visa card not working on Mastercard network – or vice versa
Prepaid cards are payment products that operate on global payment networks like American Express and MasterCard.
Troubleshooting is easy – card users can just check the front of their prepaid card.
Prepaid Visa card not working? If it has a Visa logo on it, it can only be used at stores that accept Visa prepaid cards. This could also be why a Visa gift card is declined
The same applies to the MasterCard or American Express network.
8. Tip tolerance holds
Prepaid cards also get declined due to the tip tolerance authorization at restaurants and other businesses where you typically tip.
This system reserves a 20% cushion in addition to the bill amount when the card gets swiped, to ensure your card has enough funds to cover the tip added later.
This means that if a prepaid Visa card has a $100 balance, and clients try to pay a $100 restaurant tab, it will get declined. After all, the card issuer needs to authorize $120 to account for a potential 20% tip.
To avoid this, clients need to make sure their prepaid balance exceeds the bill amount by at least 20% when dining out.
9. Regional and currency restrictions
Prepaid cards can also face declines due to usage restrictions based on location or currency.
Some prepaid cards or card providers only allow purchases within the specific country where the card was purchased. Trying to use the domestic prepaid card internationally online results in an immediate decline.
Additionally, currency differences can block transactions. If your card balance is in US Dollars, but you try to pay in British Pounds for an online UK shop order, the mismatch could prevent the payment from going through.
Cardholders wondering “Why is my prepaid card not working online?” may simply be attempting cross-border or foreign currency transactions prohibited under their card’s terms and conditions.
Extra Tips for Making Prepaid Cards Work Online
Even when taking precautions, prepaid cards can still fail online. Minimize headaches with these extra tips:
- Update your profile information
Add your name, address, etc. to make the card less anonymous and pass fraud screens. - Connect to alternate online payment methods
Connect your prepaid card to PayPal or retailer apps. This gives you an alternate payment option that may work if your direct prepaid card transaction fails. - Check balances frequently
Don’t get caught short at checkout. Log into your prepaid card site regularly to check your balance. Knowing exactly how much you have to spend prevents surprise declines from low funds. - Reload promptly when required
Schedule automatic top-ups or bank transfers to keep funds flowing onto your card seamlessly. Or link your bank account to quickly transfer funds when needed. - Know the fees
Some declined transactions can result from fees exceeding your card funds. Check fee schedules so you know the true amount required. - Beware restrictions
Declines can happen due to location, currency, or product limitations. Ensure you shop at allowed retailers only.
- Call support ASAP
Don’t wait if your card isn’t working. Ask “Why is my prepaid card not working online?” early to get issues resolved quicker.
Staying proactive is key to keeping prepaid cards transacting smoothly online without denials or hiccups during checkout. A little card management can prevent problems down the line.
Conclusion: Customizable Prepaid Solutions Prevent Declines
As we’ve explored, prepaid cards can fail for a variety of reasons like insufficient funds, expiration dates, fraud triggers, and more.
But while customers can take steps to reduce declines, prepaid cards inherently come with limitations.
The good news is that white-label prepaid cards offer customizable prepaid solutions perfect for a variety of businesses.
They offer versatility, security, customization, and branding benefits on robust processing platforms engineered to avoid common prepaid card pitfalls.
Most importantly, these virtual and physical prepaid cards are often specifically optimized for smooth online transactions. This prevents the headaches of denied payments and abandoned carts.
Simplify prepaid programs and say goodbye to card declines with Berkeley Payments. Our experts can guide you through building the ideal prepaid card solution or gift card for your unique business needs.
