Question

Briefly explain the stored value card and its types.

Answer 1

1. A stored-value card is a type of debit card that is pre-loaded with a certain amount (value), with which a payment is made.
2. It is a card that has default monetary value on it.
3. The card may be disposed of when the value is used or recharged to use it again.
4. The major advantage of the stored-value card is that customers don’t need to have a bank account to get prepaid cards.
5. There are two varieties for the stored-value cards.

• Closed Loop:

1. In closed-loop cards, money is metaphorically stored on the card in the form of binary-coded data.
2. Closed-loop cards are issued by a specific merchant or merchant and can only be used to make purchases from a specific place, e.g. Chennai metro rail travel card.

• Open-loop (multipurpose):

1. Open-loop cards can be used to make debit transactions at a variety of retailers.
2. It is also called prepaid-debit cards.
3. It can be used anywhere the branded cards are accepted, e.g. Visa gift cards.