Debit and Prepaid Cards: Are There Any Remaining Differences?
At the current state of product maturity for general purpose reloadable (GPR) prepaid cards, it’s difficult to find a meaningful difference in convenience and functionality between GPR prepaid cards and traditional debit cards issued by financial institutions in connection with an individually assigned checking account. The two products, debit and GPR, even look the same since both are required by law to have the word “debit” printed on the card front. Some GPR cards are also being issued now with EMV chips, which makes the distinction even harder to detect. The Consumer Financial Protection Bureau (CFPB), in its Frequently Asked Questions page, points only to the account structure as the defining difference between the two products:
What is the difference between a prepaid card, a credit card, and a debit card?
Answer: Unlike a debit card, a prepaid card is not linked to a bank account. Generally, when you use a prepaid card, you are spending money that you have already loaded onto the card.
When new prepaid rules take effect April 1, 2019, the regulatory construct that governs both products will become even closer. This has some prepaid program managers considering whether to continue to operate as a prepaid organization or seek a banking partner to issue debit cards, each with a distinct checking account. In the report, The Blurred Lines Between Debit and Prepaid Cards
, we examine the two payment products, consider whether any of the more nuanced differences between the two products have purpose or if the prepaid card segment of the payments industry simply reinvented financial institution-based debit cards, and we discuss how the prepaid industry has influenced traditional debit cards