Prepaid debit card benefits and disadvantages
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`Page 1 of 4
`
`Credit Cards > Credit Card News > Prepaid debit card benefits and disadvantages - Editorial Policy
`What are the pros and cons of prepaid debit cards?
`By Ben Woolsey
`
`Prepaid debit cards began to take off in the 1990s as credit card company's realized that a significant portion of
`the U.S. population was not able to qualify for many of their credit cards. Even among those who did qualify a
`certain portion often defaulted on their outstanding balances and declared bankruptcy, which drove up losses. An
`early attempt to address this market need was in the form of a secured credit card, which involved having a credit
`line that was "collateralized" by an equal sum of money deposited with the credit card bank. During the first few
`years the secured card's credit line was set at 100 percent of the savings on deposit. Once a satisfactory payment
`history was established by the customer the bank would begin extending gradual amounts of credit beyond the
`savings total – sometimes up to 200 percent of the deposit. This way the bank was able to create a stable credit
`card customer who might not qualify otherwise and still limit their ultimate losses should the customer default.
`
`Later variations of the secured credit card took the form of prepaid
`debit cards where funds were loaded directly onto a Visa or
`MasterCard prepaid debit card either at a merchant location or
`online with a bank which marketed the products. These products
`functioned just like a prepaid phone card and essentially just
`converted paper currency into electronic currency accessed via a
`plastic card. Prepaid debit card credit lines would always be set at
`the amount deposited and would be drawn down with purchases.
`
`The advantages of prepaid debit cards include being safer than carry
`cash, worldwide functionality due to Visa and MasterCard merchant
`acceptance, not having to worry about paying a credit card bill or
`going into debt, the ability for anyone over the age of 18 to apply and
`be accepted without regard to credit quality and the ability to reload
`with any amount of money online, over the phone or at any ATM worldwide.
`
`The disadvantages include the fact that you don't have the luxury of using a credit card bank's funds for 25 days
`for free (but you could also look at that as an advantage, too). Another is if the card is lost or stolen Visa and
`MasterCard have much stricter notification requirements than with a credit card.
`
`All in all the advantages of prepaid debit cards usually outweigh the disadvantages -- especially for those
`individuals who don't have access to standard credit cards due to lack of credit history or because their credit
`rating is less than perfect.
`
`Published: March 22, 2006
`
`Three most recent Emerging payment systems: Prepaid, debit, gift cards stories:
`
`• What to do when a new gift card shows zero balance – You give (or get) a new gift card, and the first
`time it's used, pfft! It's empty. Whether the problem is fraud or simple human error, follow these steps to
`retrieve its value ...
`
`http://www.creditcards.com/credit-card-news/prepaid-debit-card-benefits-1271.php
`
`3/31/2015
`
`eBay et al., Ex.1011, p.1
`
`
`
`Page 1 of 4
`
`Credit Cards > Credit Card News > Prepaid debit card benefits and disadvantages - Editorial Policy
`What are the pros and cons of prepaid debit cards?
`By Ben Woolsey
`
`Prepaid debit cards began to take off in the 1990s as credit card company's realized that a significant portion of
`the U.S. population was not able to qualify for many of their credit cards. Even among those who did qualify a
`certain portion often defaulted on their outstanding balances and declared bankruptcy, which drove up losses. An
`early attempt to address this market need was in the form of a secured credit card, which involved having a credit
`line that was "collateralized" by an equal sum of money deposited with the credit card bank. During the first few
`years the secured card's credit line was set at 100 percent of the savings on deposit. Once a satisfactory payment
`history was established by the customer the bank would begin extending gradual amounts of credit beyond the
`savings total – sometimes up to 200 percent of the deposit. This way the bank was able to create a stable credit
`card customer who might not qualify otherwise and still limit their ultimate losses should the customer default.
`
`Later variations of the secured credit card took the form of prepaid
`debit cards where funds were loaded directly onto a Visa or
`MasterCard prepaid debit card either at a merchant location or
`online with a bank which marketed the products. These products
`functioned just like a prepaid phone card and essentially just
`converted paper currency into electronic currency accessed via a
`plastic card. Prepaid debit card credit lines would always be set at
`the amount deposited and would be drawn down with purchases.
`
`The advantages of prepaid debit cards include being safer than carry
`cash, worldwide functionality due to Visa and MasterCard merchant
`acceptance, not having to worry about paying a credit card bill or
`going into debt, the ability for anyone over the age of 18 to apply and
`be accepted without regard to credit quality and the ability to reload
`with any amount of money online, over the phone or at any ATM worldwide.
`
`The disadvantages include the fact that you don't have the luxury of using a credit card bank's funds for 25 days
`for free (but you could also look at that as an advantage, too). Another is if the card is lost or stolen Visa and
`MasterCard have much stricter notification requirements than with a credit card.
`
`All in all the advantages of prepaid debit cards usually outweigh the disadvantages -- especially for those
`individuals who don't have access to standard credit cards due to lack of credit history or because their credit
`rating is less than perfect.
`
`Published: March 22, 2006
`
`Three most recent Emerging payment systems: Prepaid, debit, gift cards stories:
`
`• What to do when a new gift card shows zero balance – You give (or get) a new gift card, and the first
`time it's used, pfft! It's empty. Whether the problem is fraud or simple human error, follow these steps to
`retrieve its value ...
`
`http://www.creditcards.com/credit-card-news/prepaid-debit-card-benefits-1271.php
`
`3/31/2015
`
`eBay et al., Ex.1011, p.1
`
`
`
`Prepaid debit card benefits and disadvantages
`
`Page 2 of 4
`
`• 9 tips for using mobile gift cards safely – A growing number of mobile gift cards and apps let you give,
`receive and use gift cards all on your smartphone -- no traditional wallet needed. Convenient, right? But
`they also present new security issues ...
`• Retailers push system to rival Apple Pay and other mobile wallets – Two drugstore chains switched off
`support for Apple Pay, as a group of big retailers gets behind a rival system for checkout smartphone
`payments ...
`
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`http://www.creditcards.com/credit-card-news/prepaid-debit-card-benefits-1271.php
`
`3/31/2015
`
`eBay et al., Ex.1011, p.2
`
`
`
`Prepaid debit card benefits and disadvantages
`
`Page 3 of 4
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`http://www.creditcards.com/credit-card-news/prepaid-debit-card-benefits-1271.php
`
`3/31/2015
`
`eBay et al., Ex.1011, p.3
`
`
`
`Prepaid debit card benefits and disadvantages
`
`Page 4 of 4
`
`http://www.creditcards.com/credit-card-news/prepaid-debit-card-benefits-1271.php
`
`3/31/2015
`
`eBay et al., Ex.1011, p.4
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