Prepaid Visa Card Misconceptions
Having sold prepaid Visa cards for a number of years, I’ve heard many questions and concerns about the products we sell. I thought it would be interesting to address some of the most common misconceptions.
Misconception: Prepaid Visa cards are heavily burdened with fees.
Fact: Every prepaid card program is set up differently depending upon the needs of the corporate sponsor. Typically, we see two different types of card programs:
- Cards with Fees: Some cards have fees associated with actions taken by the cardholder. Cards that fall into this category may charge the cardholder for activation, transactions, ATM withdrawals, and even customer service. Typically, cards that are heavily fee-based will be sold to a customer on a retail level (cards that are sold directly to the end consumer).
- Cards without Fees: Corporate-sponsored programs are often set up so there are minimal fees to the cardholders. I firmly believe that cards being used as a corporate reward or incentive should fall into this category. The card fees are born upfront by the corporate sponsor, and in turn, the final recipient benefits from the full value of the reward without having to pay to use it. Berkeley has the ability to customize programs based on our clients’ needs. If the client wants to apply fees for card use we can do so, if not, our standard option carries no cardholder fees.
Misconception: It is illegal for prepaid Visa cards to expire.
Fact: Many provinces in Canada have legislated retailers against selling gift cards that expire. This legislation is provincially mandated.
- Credit cards (i.e. Visa) or gift cards issued by Visa fall under federal legislation and are exempt from provincial legislation. Just like your credit card, prepaid Visa cards do expire. The expiry date is between 1 and 3 years and is dependent upon the program and type of card being issued.
Misconception: Some retailers do not accept prepaid Visa cards.
Fact: Prepaid Visa cards are welcomed wherever Visa is accepted; 25 million locations worldwide. There are three places where cardholders often ask questions:
- Pay at the Pump: Often, when you pay at the pump, the authorizing amount is in excess of the funds on the card. If the cardholder presents the card to the station attendant rather than paying at the pump the card will work without an issue.
- Restaurants: Cardholders should be aware that restaurants factor in an automatic tip when authorizing a purchase transaction. If the total purchase amount – including the estimated tip – exceeds the available amount on the card, the card may be declined. The cardholder should inform the merchant about how much to deduct from the prepaid Visa card in advance and advise the merchant of the preferred second payment method (credit card, debit card, cash or cheque) to cover the difference (if required). The same problem would occur if your credit card had a low credit limit.
- Hotels: Much like at restaurants, when authorizing a transaction, hotels factor in an automatic hold to cover incidental expenses. If the authorized amount exceeds the amount on the card, the transaction may be declined.
Misconception: Cards are like cheques or cash.
Fact: While prepaid Visa cards offer similar benefits of cash or cheques, there are also many differences:
- Security: Cash or cheques that are lost are costly to replace. Prepaid cards can be replaced quickly and painlessly.
- Branding: The wallet share gained by offering a branded prepaid Visa card goes a long way towards generating brand loyalty. Every time the cardholder uses their customized prepaid Visa card they will think of your company and what they did to receive that prepaid card.
- Reward Value: Extensive research supports the value of rewarding people with something that does not ‘get lost in the shuffle’. Often when you ask an employee what they did with their bonus last year, they can’t tell you. Most bonuses are paid in cash and that cash goes towards paying rent, car payments, or buying groceries. Rewarding people with a prepaid Visa card that they can keep in their wallet and spend on things they want, need, or have their eye on is a sure way to offer a reward they can use and remember.
Misconception: Prepaid Cards can help you improve your credit.
Fact: Prepaid cards are a great for budgeting purposes but they are not associated to credit scores and they will not help you improve your credit.