Prepaid card is a payment card funded in advance that spends a loaded balance and stops working when the balance runs out, with no account or credit line behind it, which separates it from debit and credit cards. A program usually involves four parties: a licensed issuer that holds the funds and owns the BIN, a program manager, a processor authorizing against the balance in real time, and a distributor. Loads arrive by bank transfer, card, cash top-up or payroll, and card-funded loads can be charged back after the money is spent. Anti-money-laundering rules, not product design, set limits and identity checks. Open-loop cards work wherever the scheme is accepted; closed-loop cards work at one retailer or network.
How does a prepaid card work
A prepaid program looks like one product and is usually four companies. A licensed issuer holds the funds and owns the BIN. A program manager runs the customer-facing side: onboarding, app, support, marketing. A processor authorizes each transaction against the balance in real time. A distributor sells or hands out the cards.
Anyone launching a program is buying access to the first of those roles. Without a licensed issuer willing to sponsor it, a card program cannot exist at all, which makes issuer selection the long pole in every launch timeline.
Getting money on, and the limits that come with it
Loads arrive by bank transfer, card-to-card, cash top-up at a retail network, or an employer payroll file. Operators asking what is prepaid card risk in a program almost always mean this stage: a card-funded load can be charged back after the balance has already been spent, a fraud pattern most programs learn about the hard way.
Limits are set by anti-money-laundering rules rather than product design. Low-value, non-reloadable cards can be sold with little or no identification in some regimes, while anything reloadable, cash-loadable or usable across a border triggers full identity verification and ongoing monitoring.
Open loop, closed loop, single load
Open-loop cards carry a scheme logo and work wherever that brand is accepted, so a merchant handles them exactly like any other card payment. Closed-loop cards work at one retailer or network — store gift cards, transit cards, fuel cards — and never touch a card network. Reloadable cards can be topped up indefinitely; single-load cards are spent once and thrown away.
Where the program makes its money
Issuance, load, ATM withdrawal, inactivity and replacement fees, a share of interchange, and the FX margin on foreign spending, which is often the largest line of all. Corporate programs earn less per card and considerably more per account: expense cards with per-card spending rules, virtual cards issued for a single supplier payment, payout cards for gig workers who have no bank account.
Where prepaid cards get refused
Hotels and car rental desks place holds that a thin balance cannot cover. Subscription merchants block stored-value BIN ranges outright to avoid failed renewals. The balance itself is normally e-money, and the safeguarding rules that come with it are why a program cannot lend the float out to bridge those gaps.