American shoppers love prepaid cards. In 2012, U.S. consumers used prepaid cards to make $99.5 billion in purchases — a 19 percent increase from just the year prior. In 2014, total prepaid spending could exceed $200 billion, or roughly five percent of all retail purchases in the country.
Fast and convenient, prepaid cards are a favorite among those who want greater control over their spending and savings.
Advantages of Prepaid Cards for Small Businesses
Done correctly, prepaid cards can offer a lot of advantages. For starters, you’re giving customers another way to purchase the products and services that you sell. This is increasingly important for that growing portion of consumers who don’t carry cash at all — and there are yet more American shoppers who don't have credit cards, bank accounts or debit cards.
In other words, accepting prepaid cards allows you to tap into a pool of potential customers who might otherwise be inaccessible.
Other benefits to small businesses include:
- More impulse buying. With a simple swipe or PIN code, shoppers can buy what they need (and don't need) just as they would with traditional credit cards.
- Low risk. You enjoy the same merchant account protection that comes standard with credit cards. But with prepaid cards, the money is already there.
Limitations of Prepaid Cards
Accepting prepaid cards can help your business grow. But there is one important limitation — unless they supplement their purchase with other payment methods, consumers are limited to the spending balance on the card. This can limit prepaid cards’ effectiveness for driving larger purchases.
Prepaid card fees are also a factor for many businesses. Most fees for prepaid cards come in two parts:
- A percentage transaction charge (0 percent to 2 percent)
- A fixed transaction charge ($0 to $2)
Because the bulk of prepaid purchases are for smaller-ticket items, the fixed portion of your merchant fee may be disproportionately high. Paying $1 plus 1 percent on an item that retails for $5 can eat into your profit margins.
Should Your Small Business Begin Accepting Prepaid Cards?
If you already have a merchant account, accepting prepaid cards is relatively easy. To learn more about merchant accounts at BluePay, click here or speak with a member of our merchant services team today.