CFSI Nonprofit Guide To Prepaid Cards

The Nonprofit’s Guide to Prepaid Cards
Brought to you by the Center for Financial Services Innovation

With support from the Network Branded Prepaid Card Association,
NetSpend® Corporation, and the Annie E. Casey Foundation
Dear Reader:
Prepaid cards are everywhere. Look around, and you’ll see them offered online; on television; in
supermarket or retailer checkout lines; by check cashers and tax preparers; and even in some bank
lobbies. In 2009, the FDIC estimated that approximately 10 percent of U.S. households, including
12 percent of unbanked and 16 percent of underbanked households, use prepaid cards, and that
number is increasing rapidly.
The Center for Financial Services Innovation (CFSI) works to transform the financial services
marketplace so that underbanked consumers can achieve financial prosperity. Since our inception
in 2004, we have championed prepaid cards as a financial product that, with the right features,
pricing, and consumer protections, can provide real benefits to the country’s 30–40 million
unbanked and underbanked households.
CFSI created this resource guide for nonprofit organizations that are working on consumer finance
issues and are interested in learning more about prepaid cards. The guide provides a basic primer
on prepaid, as well as tools to help you explore how to incorporate prepaid into your programming.
It draws from CFSI’s wealth of research and experience with underbanked consumers, the prepaid
industry, and nonprofit organizations’ efforts to connect the two.
Who Should Read This Guide?

• Nonprofit community-based organizations
• Nonprofit policy, research, and/or advocacy organizations
• Regulators/government officials
• Funders
After reading this guide, we hope you will, at a minimum, have a better understanding of prepaid
cards and their potential benefits. We also hope you will be better equipped to incorporate prepaid
into your programming to the extent that it fits with your mission and capacity—whether that
means being ready to answer your clients’ questions or going so far as partnering with a financial
services company to distribute the cards yourself.
What This Guide Does Not Include

This guide does not include a ready-made curriculum for educating consumers about prepaid or
a “train-the-trainer” program. It also doesnot provide legal or business advice, nor does it offer
an organized list of prepaid card providers or details about particular card programs’ fees and
features.1 Given the industry’s size and its rapidly evolving nature, this information is difficult to
gather and to keep current. Most importantly, this guide is not intended to make decisions for your
organization, but rather it will reveal what additional information you need to gather so that you
can make your own decisions about how to engage with prepaid cards.
Stay in Touch
We wish you the best of luck as you begin your work with prepaid cards. As you go forward, we
want to hear from you. We welcome your feedback on this guide and encourage you to email us at
info@cfsinnovation.com with your questions and comments, and to tell us about your experiences,
innovations, and best practices.
The CFSI Team
September 2010
1 There are many online prepaid card comparison tools such as CreditCards.com
http://www.creditcards.com/prepaid.php, Credit Card Guide, http://www.creditcardguide.com/prepaid.html, and Compare Cards
http://www.comparecards.com/compare-by-category/prepaid-debit-credit-cards/page/1; however CFSI cannot vouch for the accuracy
or completeness of the information provided on these websites.
The Nonprofit’s Guide to Prepaid Cards 2

Acknowledgements
This guide would not have been possible without the generous support of our sponsors—the
Network Branded Prepaid Card Association (NBPCA), NetSpend® Corporation, and The Annie
E. Casey Foundation. CFSI would also like to acknowledge Joshua Wright, who contributed
significantly to this project, as well as Jennifer Sierecki, Janet Raffel, and Katherine Lucas-Smith,
who reviewed drafts and provided useful feedback.

Table of Contents
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A Role for Nonprofit Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
About This Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Part I: Prepaid Primer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

What Is a Prepaid Card? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
How Do Prepaid Cards Work? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Short-Term Loans/Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fee Structures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
How Do Prepaid Cards Compare with Other Payment Products? . . . . . . . . . . . . . . . . . . . 14
Comparison with Other Transactional Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A Note About Wage Garnishments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Overdraft Protection on Prepaid Cards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Prepaid Industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Industry Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Economic Overview of the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal and Regulatory Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Benefits and Issues for Consumers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Potential Cost Savings with Prepaid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Part II: Opportunities for Nonprofits to Engage with Prepaid. . . . . . . . . . . . . . . 24

The Engagement Continuum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Key Considerations in Choosing an Engagement Strategy. . . . . . . . . . . . . . . . . . . . . . . . 25
Levels of Engagement with Prepaid Cards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Information and Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Referral and Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Appendix A: Case Studies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Understanding Clients’ Financial Services Needs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
One Nonprofit’s Distribution Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Appendix B: Legal and Regulatory Issues that Impact Nonprofit

Prepaid Card Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Appendix C: Selecting a Prepaid Card Provider Partner. . . . . . . . . . . . . . . . . . . 41
About CFSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
About the Sponsors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Introduction
An estimated 30–40 million American households are considered unbanked or underbanked.1 This
means they either have no account relationship with a mainstream bank or credit union, or if they
do, they also rely on nontraditional financial services such as check cashing, money orders, and
payday loans to meet their financial services needs. These underbanked consumers spend $13
billion each year on non-bank basic financial service transactions.2 Many of these transactions
are costly, but individuals rely heavily on these non-bank providers because traditional financial
services often do not meet their needs. The underbanked need the ability to turn their paychecks
and/or government benefits checks into cash quickly, pay bills, buy basic necessities, establish
savings, transfer money to friends and family, borrow money for emergencies, and build assets over
the longer term.
A number of financial institutions and other organizations are developing solutions to address the
needs of this underbanked market. Many banks and credit unions offer low-cost or free checking
and savings accounts, and some offer payday loan alternatives and check-cashing services.
However, low-cost, high-quality financial products and services are not widely available in all
communities across the country, and those that are do not necessarily meet all of the needs of the
large and multifaceted underbanked population.
General-purpose reloadable prepaid cards present a promising part of the solution to meeting the
financial needs of the underbanked. These cards function like electronic bank accounts without
checks. Consumers can load funds onto their cards and can spend only what they load, providing
immediate liquidity while limiting the risk of overdraft. Prepaid cards may be a good entry-level
financial product for individuals without a traditional checking account. Like a bank account,
they provide a safe way to carry an account balance, manage cash and—because they can
generally be used wherever MasterCard® and Visa® are accepted—pay for purchases. Some have
attached savings accounts with automated deposits—features that can help people build savings.
Furthermore, prepaid cards may encourage the use of additional financial services, moving
individuals into the economic mainstream and onto a path toward greater financial prosperity.
Research suggests that many consumers derive benefits from their prepaid cards: in a 2009 survey
of 400 underbanked prepaid card users, conducted by CFSI and the Network Branded Prepaid
Card Association, 78 percent of respondents told CFSI that their cards were very or extremely
useful, 74 percent said they were very likely or certain to recommend the card to others, 60
percent used their cards weekly, and 12 percent reported daily use.3 However, prepaid cards may
not be for everyone. A card’s usefulness depends on its associated fees and features, as well as the
needs and behaviors of customers using the card. A useful product is generally thought to enable
customers to meet their transactional needs in a cost-effective way and to provide them with a
path to savings and credit-building opportunities.
1 The Federal Deposit Insurance Corporation’s (FDIC’s) December 2009 National Survey of Unbanked and Underbanked Households
[http://www.fdic.gov/householdsurvey/] estimates 9 million unbanked households and 21 million underbanked, while CFSI’s 2008
Underbanked Consumer Study [http://www.cfsinnovation.com/publications/list/CFSIUnderbankedConsumerStudy] estimates 18.5 million
unbanked households and 21.6 million underbanked. Differences in the unbanked estimates are likely due to differences in research
methodologies.
2 CFSI estimate based on publicly available financial services transaction volume data and average industry fees.
3 Satisfaction with and Usage of Prepaid Cards, NBPCA/CFSI Survey Results, http://www.cfsinnovation.com/topics/article/330558,
April 2009.

Introduction
A Role for Nonprofit Organizations

General purpose reloadable prepaid cards are widely available, but not well understood. As prepaid
cards are a potentially beneficial product in helping consumers meet their short-term financial
transaction needs and possibly their longer-term savings and credit-building goals, nonprofit
organizations can play a critical role in shaping the public discourse and educating consumers
about the products, helping them make informed choices. In addition, some organizations may
decide to go further and more directly connect consumers to prepaid card products by making
referrals to individual or multiple providers or becoming distributors of cards themselves.
Nonprofits can add significant value in the prepaid supply chain, as the prepaid card industry
is increasingly coming to recognize.
Over the past few years, CFSI has seen growing interest among nonprofits in prepaid, and received
increased requests for information about the product and opportunities to engage more deeply with
the industry. We conducted two unpublished surveys of nonprofit organizations: one in late 2008
with 125 respondents that collectively serve more than 5 million underbanked consumers; and
the second in late 2009 with 51 respondents, all engaged in free tax preparation. In both surveys,
78% of respondents said they would consider incorporating information about prepaid cards into
their financial education programming, and the majority also expressed an interest in distributing
cards to their constituents, with 14% already doing so.
About This Guide

This guide is designed to be a practical tool for nonprofits at various levels of understanding and
interest in prepaid cards. The guide has two main parts:
1. Prepaid Primer—this guide will provide a detailed overview of prepaid cards, how they work,
the industry structure, and the benefits and issues for consumers.
2. Opportunities for Nonprofit Organizations—this guide will outline several options for nonprofits
to engage with prepaid, strategic considerations to help you select the right approach, and tips
for success with the path chosen.
After reading this guide, we hope you will have an improved understanding of prepaid cards and
will be better equipped to incorporate prepaid into your organization’s programming.

Part I: Prepaid Primer
What Is a Prepaid Card?
The term “prepaid card” refers to a wide range of cards that store money electronically and serve
a variety of purposes. Prepaid phone cards were first introduced in the 1970s. Since then, the
product type has expanded to include a wide range of related products, including store gift cards,
healthcare flexible spending and defined benefit cards, federal and state benefits cards, payroll
cards, and general-purpose cards.
Cards can be grouped based on two criteria: they can be (i) either closed-loop or open-loop and
(ii) either one-time use or reloadable.
Closed-loop—The money stored on these cards can be used only in certain stores and/or on certain
goods and services.
Open-loop—These cards are issued by a financial institution and the funds may be accessed in any
location that accepts the card payment network (e.g., MasterCard®, Visa®) for any type of purchase.
One-time use—These cards can be loaded only once. When the money is spent, the card is no
longer useable.
Reloadable—These cards can be reloaded with money again and again.
Furthermore, the main application of the card is often determined by who loads funds onto
the card. As illustrated in Figure 1 on the next page, these parameters map out the prepaid
card space.

Travel General Purpose Reloadable*

Incentive/Bonus
Payroll
Social Security Who Loads the Card?
Disaster Relief
Employer
Open-loop
Corporate
Rebate Refund
Government
Consumer
*General Purpose
Reloadable Cards are
Welfare the focus of this guide
Phone Cards
Closed-loop
Money Transfer
Gift
H
ealthcare and
Defined Benefit
Promotional
One-time use Reloadable
Figure 1 – Types of Prepaid Cards
This guide focuses exclusively on general-purpose, open-loop, reloadable (GPR) prepaid cards
carrying one of the major payment network brands (such as MasterCard® and Visa®). GPR cards
have many advantages over closed-loop cards, including wider acceptance and more consumer
protections; closed-loop cards facilitate spending only within the closed loop. For the rest of the
guide, prepaid cards will refer only to general-purpose, open-loop, reloadable (GPR) prepaid cards.

How Do Prepaid Cards Work?

Prepaid cards function like checkless checking accounts. They enable the user to load money onto
the card, store the money safely, and spend or withdraw the funds in a variety of ways. Technically,
prepaid cards are debit cards, meaning they are plastic cards issued by a financial institution that
are used to make purchases. That purchase amount is deducted directly from the cardholder’s
account. However, the term “debit card” is most commonly used to refer to cards associated with
checking accounts, and that is the definition used in this guide. Prepaid cards are a type of debit
card with no associated checking account.
Prepaid cards are issued by financial institutions, carry one of the major payment network brands,
and are accepted wherever those network brands are accepted, just like a debit card associated
with a checking account. The features and fees associated with the cards vary widely. Tables
1A and 1B (pages 10 and 11) summarize basic and advanced card features. Information about
pricing and fees can be found in Table 2 (page 13). The vast majority of prepaid cards include
all of the basic features, which enable a user to handle most simple financial transactions, and
a growing number include the types of advanced features described below.
Figure 2 provides a visual representation of how prepaid cards work.
1 2 3
Load/reload money Store and Spend money in
onto FDIC-insured card manage money a variety of ways
Direct Deposit General Spending Savings ATM Withdrawal
Loading Networks Retail Point of Sale

(e.g., Green Dot, Reloadable Prepaid Card • PIN
MoneyGram, • Signature
Western Union) Photo
Retail Cash Back
Government Benefits Network
Logo
5151 5800 1234 5576
Electronic Bill Pay
Tax Refunds Cardholder Name 12/10
Remittance
Proprietary Loading
Networks
Check balances via: Transfer to a 2nd Card
• Online • Text Message Alert
• Phone • Online Budgeting
Key
• ATM
Basic Features Advanced Features
Figure 2 – How Prepaid Cards Work

Table 1A – Basic Card Features

Feature Explanation
Cash loading Prepaid card users can add funds onto their prepaid cards in-person at MoneyGram and Western Union
locations, as well as at many check cashers, grocery stores, and convenience stores that participate in
the GreenDot, ReadyLink, or rePower prepaid networks (see Figure 3 on page 18).
Direct deposit Paychecks (if employer offers direct deposit) or government benefits can be directly deposited onto the
card, usually for free.
Point of sale (POS) Pay for purchase in stores anywhere the network brand is accepted, and sign as you would with a credit
purchase with your card purchase.
signature
POS purchase with a Pay for purchase in stores anywhere the network brand is accepted, and type in your confidential PIN
Personal Identification as you would with a debit card.
Number (PIN)
ATM cash withdrawal Withdraw money at any ATM in the card’s network (e.g. Cirrus, Plus, etc.). If you use an ATM that is not
owned by the issuing bank, there are often associated fees from both the card company and the bank
or company that owns the ATM. Several card programs allow access to surcharge-free ATM networks,
like Allpoint.
Cash back with Withdraw money from the account for free at most major supermarkets and drugstores when you make
purchase a purchase.
Check balance online Use a secure password to check your card balance online, usually for free.
Check balance over Call a phone number to check your card balance using an automated system or with a live customer
the phone service agent. If you request to speak to an agent, there is often a fee.
Check balance Use an ATM in your card’s network to check your card balance, usually for a fee.
at an ATM
FDIC pass-through FDIC insurance is a basic consumer protection most commonly associated with checking and savings
insurance accounts. It insures customer deposits at FDIC member banks for up to $250,000 in the event of a bank
failure. Since 2008, FDIC insurance has been available for individual prepaid card account holders as long
as certain conditions are met by the prepaid provider. Mainly, the pooled account at the issuing bank must
be identified as a custodial account, and the funds deposited by the provider at an FDIC-insured depository
institution must be identifiable and traceable to the individual card account holders. Most major card
providers comply with these requirements, but this should be confirmed before entering into an agreement
with any prepaid card provider. FDIC insurance is a particularly important benefit for prepaid card users,
who tend to have lower incomes and can least afford to lose access to their money.
Fraud protection Payroll card accounts are covered by the Electronic Fund Transfer Act (EFTA) and offer a full range of error-
resolution procedures. Most issuers of GPR cards provide EFTA-like protections for cardholders. Further,
GPR cards are subject to the card brands’ “zero-liability” policies. Like a credit card, if the card is used
fraudulently, the cardholder can dispute the charge and cannot be held liable for more than $50 in charges.
Unlike a credit card, this is not a legal requirement, but it is the current practice for MasterCard® and Visa®.

Below are the most common advanced features on prepaid cards. However, the industry is evolving
rapidly, and new features are being introduced regularly. For any nonprofit organization actively
engaged with prepaid, it is important to stay abreast of new developments and changes.4
Table 1B – Advanced Card Features

Feature Explanation
Online bill pay Allows the cardholder to pay bills securely online. Payment can be made electronically, or a paper check can
be sent if the payee does not accept electronic payment. This is very similar to the bill pay feature offered on
many checking and savings accounts.
Credit building Cardholders who pay recurring bills through online bill pay can elect to have regular monthly payments reported
to an alternative credit bureau such as Payment Reporting Builds Credit (PRBC)4, enabling consumers to build
a credit record.
Savings account Provides a way to set aside money into a separate savings account linked to the card, either a separate card
for the savings account or a savings wallet connected to the same card. This money cannot be spent unless it
is intentionally moved from the savings account into the general spend portion of the card. Some cards allow
cardholders to set up recurring automatic transfers from the general spend account into the savings account.
Preliminary data show that having an automated savings account is one of the best tools to help people build
savings. Many prepaid card providers offer a competitive Annual Percentage Yield (APY) on savings.
Online budgeting Enables cardholders to set monthly budget targets by category and in total. Cardholders receive automatic
alerts via email or text message when they have gone over budget.
Account information Cardholders can sign up for both text message alerts that are automatically sent to them (i.e., cardholders
via text messaging can receive a text every time they perform a transaction with the transaction amount and current remaining
balance, or daily text messages with current balance) and/or for the capability to send text messages to
request specific information (e.g., by sending a one-word text message reading “balance” to a short code,
the cardholder instantly receives a text back with their current available balance).
Second card There are two types of second cards. One allows access to all the funds on the card, like a joint card.
The other only allows access to amounts specifically transferred onto the second card.
Remittance Enables transfer of money to other countries, either for pick up or for withdrawal off of a second card.
Photo A picture of the cardholder on the card makes the card a secondary form of identification and provides added
security.
Line of credit/ The cardholder can apply for a short term loan on the card. This is usually available only if you have recurring
Short-term loan direct deposits. The loan is automatically paid back when the next direct deposit occurs. (See sidebar on Short
Term Loans/Lines of Credit on page 12.)
Overdraft protection Many prepaid card providers offer an opt-in overdraft protection feature tied to a card for a fee that enables
cardholders to make purchases or ATM withdrawals for amounts greater than the balance in their card account.
(See sidebar on Overdraft Protection on page 16.)
Proprietary loading Allows nonprofit organizations that distribute cards to offer reloading services on-site.
network
Person-to-person Some prepaid companies allow free or low-cost transfers of funds between their cardholders via the Internet
transfers or text message.
Insurance Some prepaid cards offer insurance benefits such as Accidental Death and Dismemberment coverage at no
or low cost.
4 For more information about PRBC, see http://www.microbilt.com/nontraditional-credit-report.aspx.

Short-Term Loans/Line of Credit

Short-term loans or lines of credit are increasingly offered through prepaid cards, and such products are evolving
rapidly. Fees and interest rates for these credit products vary widely. While most are lower cost than payday loans,
many still may be considered high-priced. Nonprofits can help clients determine whether such products are right
for them. Used occasionally and paid off promptly and in full, such products can be beneficial to the consumer
who has few or no other borrowing options. When used frequently or to roll-over to pay off other loans, they can
impose an untenable debt burden on the customer.
Below are two examples of credit products tied to prepaid cards with different pricing, terms, and features.
Examining these products will help you better understand the short-term loan/line of credit services offered
in the prepaid card industry.
iAdvance (www.myiadvance.com)—Offered by Metabank, iAdvance is available to consumers that have direct deposit
onto an eligible prepaid card. The consumer applies and receives the credit limit online or by phone, and the loan is
made and becomes available in a matter of minutes. The fee is $2.50 for every $20 advanced, resulting in an APR
of 150 percent. The entire loan amount is deducted off of the card at the next direct deposit.
Emerald Advance (www.hrblock.com/bank/emerald_advance/index.html)—Offered by H&R Block Bank, this service
functions as a year-round unsecured line of credit at 36 percent APR and a $45 annual fee. Individuals can
repeatedly borrow and repay throughout the year, but the line of credit (up to $1,000) must be paid down each
year by February 15. The line of credit is established when a customer establishes direct deposit to an associated
prepaid card (H&R Block Emerald Prepaid MasterCard®) or makes a deposit of $300–$1,000 in an associated
savings account (H&R Block Emerald Savings account), thereby reducing the APR to 9 percent. The borrower must
make a monthly minimum payment amount of $40 or 4 percent of the outstanding balance, whichever is greater,
and can pay down their line of credit with a portion of their tax refund.

Fee Structures
Two pricing models prevail in the industry today. One charges a moderate monthly fee (e.g., $10 a
month) and no fee for individual transactions (signature or PIN purchases). The other has a low or
no monthly fee and instead charges for certain transactions made using the card. In both of these
models, there are often still charges for other transactions (e.g. ATM withdrawals, reloading, etc.).
Like card features, prepaid card fees vary a great deal. In addition to monthly and pay-as-you-go
pricing models, there are also basic card products with fewer features and lower costs, as well as
feature-rich products that often have higher costs. Table 2 shows common fees and their average
amounts. Competition and technological innovation have spurred a broad reduction in prices as
the industry has matured.
Table 2 – Common Prepaid Card Fees

Fee Type Explanation Range Comment
Activation fee Fee to activate your card, a sign-up $0 / $3 to $10 Usually free only with direct deposit
or start-up fee
Monthly fee Maintenance, usage, and other fees $0 to $15 ees may vary with level of usage or
F
charged to your account each month be waived for an introductory period.
Fee for point-of-sale Fee assessed at POS for purchases $0 to $2
(POS) transaction using using your PIN, like a debit card
Personal Identification
Number (PIN)
Fee for POS transaction Fee associated with purchases made in $0 to $1 Often cheaper than PIN POS transactions
using signature stores with a signature, like a credit card
ATM withdrawal fee Withdrawing cash from an ATM $0 to $5 May be higher for international withdrawals
Reloading fee Fee charged for adding money to the $0 to $5 Direct deposit is generally free; to load cash
account where your money is held is usually $4–$5 per load.
Balance inquiry fee Fee for information about your $0 to $3 May vary according to how information is
available balance requested. Usually free if checked online, by
text message, or through an automated phone
system. Balance inquiries at an ATM or with a
live customer service agent by phone usually
incur a fee.
Monthly statement fee Fee for obtaining monthly transaction $0 to $10 Usually free to obtain online; usually there
history is a charge to have a paper statement mailed
to you.
Cancellation/ Fee for canceling card before contract Usually no fee, Read contract carefully to determine if these
refund fees end, or requesting a partial refund of but sometimes fees apply.
money loaded onto the card upwards of $180
Insufficient funds/ Fee for making a transaction when $0 to $3 It is typically not possible to overdraft a
overdraft fee you have inadequate funds, or for prepaid card, but it can happen occasionally.
exceeding your limit Review contract documents carefully for
overdraft conditions and charges.
Foreign currency Fee to convert from another currency Up to 2% (usually Often a convenient way of getting cash in a
conversion fee during international transactions or a percentage of foreign country; rates usually are better than
travel total spent) conventional money exchanges.

Please note that Table 2 is not comprehensive. Any specific prepaid card agreement may contain
fees not listed here. Nonprofits and their clients should review prepaid card agreements (available
on the card programs’ website and in printed form in the cards’ packaging) carefully to understand
the fees associated with any given card.
How Do Prepaid Cards Compare with Other Payment Products?

Although prepaid cards are similar to debit and credit cards in many ways—all three are plastic
forms of payment that offer a secure, convenient way to pay for most purchases without carrying
cash—prepaid cards differ in the following important respects:
1. Access:
Debit and credit cards can be significantly more difficult to obtain than prepaid cards,
since they may require more identification, ChexSystems5, or credit checks.
2. Overdraft:
Prepaid cards are very difficult to overdraft compared with debit and credit cards,
saving consumers who would otherwise incur fees for exceeding credit limits or overdrawing
their accounts. Banks often permit debit and credit card transactions to proceed even when
there are insufficient funds in the associated account or when consumers exceed their credit
limits. In both cases, banks charge overdraft or over-the-limit fees. New rules for overdraft
fees go into effect for debit card transactions in late 2010. Previously, consumers were often
automatically opted in to overdraft coverage without any notification. Under the new rules,
consumers will have to actively opt in if they want overdraft coverage. Prepaid card users,
however, will almost always have such transactions declined, allowing them to avoid high
overdraft fees. In extremely rare instances, prepaid cards can be overdrawn. However, in such
cases there may still be penalty fees unless the consumer is otherwise enrolled in an optional
overdraft protection feature, if offered (for more on overdraft protection now offered on a limited
number of prepaid cards, see the sidebar on page 16). For instance, if the full value of the
transaction was not debited in real time (e.g., on airplanes or at flea markets) or all at once,
and other purchases were made in the interim, cardholders may exceed their available funds
and face a penalty. Tips at restaurants are often debited after the price of the meal is deducted.
Similarly, gas stations often charge an initial one dollar fee when consumers pay at the pump
and then deduct the remainder of the transaction later.
3. Credit building: Credit cards offer a way to build credit, as repayment information is commonly
reported to the major credit bureaus. The relationship between debit cards and credit building
is more complex and varies by product and institution. Transactions and payments made with
a debit card are not reported to the credit bureaus. However, the financial institution providing
the checking account and debit card may monitor account activity as part of its own internal
underwriting system to determine a future credit offer. Prepaid card companies are increasingly
using internal data on consumers’ transactions to make credit decisions in a similar fashion.
Currently, there are two ways to build credit with a prepaid card: 1) consumers use a short-term
loan/line of credit feature (as described in sidebar on page 12), and the card provider reports
repayment data to the major credit bureaus; 2) consumers use automatic bill pay, and the card
provider reports this activity to an alternative credit bureau such as PRBC, allowing consumers
who pay their regular bills on time to establish a record that could be used for future credit or
rental applications.
5 The ChexSystems, Inc., network comprises member financial institutions that regularly contribute information on mishandled checking
and savings accounts to a central location. ChexSystems shares this information among member institutions to help them assess the risk
of opening new accounts. For more information about ChexSystems see https://www.consumerdebit.com/consumerinfo/us/en/index.htm.

Comparison with Other Transactional Products

Prepaid is first and foremost a transactional product that allows consumers to safely store funds
and make purchases, so it is useful to think of prepaid in the context of other transactional
accounts and services. Table 3 compares key features and qualities of prepaid cards with those
of checking accounts (with debit cards), credit cards, and check cashing.
Table 3 – Prepaid Cards versus Checking Accounts, Credit Cards, and Check Cashing
Product Prepaid Checking account Check Credit
card with debit card cashing card
Check cashing Direct deposit free if Direct deposit free, regular check Yes No
feasible; otherwise still may add delay
need to cash check
Pay bills Yes Yes No—must buy Yes
money order
Earns interest Rarely Sometimes No No
Credit check required No Sometimes. ChexSystems check No Yes
often required.
Overdraft protection Rarely Yes, although regulation may No Yes, when credit limits
and fees make overdraft less common are exceeded
Fees Some combination of Often no monthly fee, but other Fees (can be Sometimes monthly
monthly fee and some fees: for checks, risk of overdraft high) at time of fee, interest charges,
transaction fees fees, or minimum balance fees check cashing late charges, overdraft
charges
Theft protection Yes* Yes No Yes
Credit Sometimes† No No Yes
Builds credit score Yes – Limited** No No Yes
ID requirements -State-issued ID or passport -State-issued ID or passport Photo -State-issued ID
(some cards accept other -Social Security number or ITIN identification or passport
foreign IDs) (not always required) only -Social Security number
-Social Security number or -Address - Address
ITIN*** (not always required
because often there is no
interest income to report)
-Address
Minimum balance No Yes (usually) No No
requirements
* MasterCard® and Visa® currently limit consumer theft liability on prepaid cards to $50, but they are not required by law to do so.
† Prepaid cards sometimes offer a short-term loan or line of credit (see page 12).
** Sometimes cards report payment of regular bills to credit agencies, which can help to build credit.
*** ITIN stands for Individual Tax Identification Number.

A Note About Wage Garnishments

Like other accounts, funds stored on prepaid cards are subject to garnishment. With a checking or
savings account, the garnisher typically must send a subpoena to the financial institution to access
account records. With prepaid cards, as the funds are stored in a pooled account, the garnisher
must subpoena the card provider rather than the financial institution, which can be more difficult.6
Overdraft Protection on Prepaid Cards

Increasingly, prepaid card companies offer overdraft protection to their cardholders, allowing them to make purchases
or ATM withdrawals for amounts greater than the balance in their card account. Consumers may opt in to this feature,
and fees for this service vary. Some programs offer a buffer or an amount (e.g., $10) that users must exceed before a
fee is charged. Some programs also offer a grace period, or a window of time during which consumers can address
the overdraft before a fee is charged. Nonprofits serve an important role in helping their clients determine whether
overdraft protection will be beneficial to them.
6 See Appleseed’s Understanding Prepaid Card Partnerships: A Guide for Nonprofit Organizations in New York,
http://ny.appleseednetwork.org/LinkClick.aspx?fileticket=Ghvb_f7S6fA%3D&tabid=628, 2010.

The Prepaid Industry

The prepaid industry has grown rapidly in recent years. In 2005, approximately $14.7 billion
was loaded onto an estimated 45 million network-branded cards. By 2008, that amount had more
than quadrupled to $60.4 billion.7 General purpose, reloadable prepaid cards in particular were
used for more than $4 billion in transactions in 2008, and that number is expected to increase
to $10.8 billion by 2011. A recent FDIC estimate suggests the growing appeal of prepaid cards:
9.7 percent of U.S. households—including 11.9 percent of unbanked and 16.4 percent of
underbanked households—use prepaid cards.8
The prepaid card industry is young, diverse, and growing quickly. A handful of large companies
have the most significant market presence—Walmart, H&R Block, Green Dot and NetSpend—but
a large number of card program managers make up the rest of the card volume. Some companies
in this space offer prepaid cards as their primary line of business, while others offer prepaid as an
addition to an established core business, such as Walmart, H&R Block, Western Union, Univision, etc.
Industry Structure
Producing a prepaid card, issuing it to customers, and ensuring its proper operation requires
collaboration by multiple companies. There are six distinct functions within the industry:
1. Payment network: The networks (Visa®, MasterCard®, Discover®, and American Express®)
provide the electronic channels through which transactions occur.
2. Card issuer: The issuing bank or other depository institution that provides the BIN (bank
identification number) for the cards and holds the funds stored on the cards.
3. Fulfillment and transaction processor: The processor facilitates fulfillment and shipment of
the cards, processes transactions, and tracks and distributes funds held in the issuing financial
institution. Sometimes these services are provided by multiple companies; some companies
specialize in fulfillment, while others specialize in transaction processing, though many carry
out both functions.
4. Program manager: This entity or person provides the customer interface for the prepaid product
and handles the marketing and day-to-day operations of a card program. Program managers can
provide fulfillment and distribution services, but more often they contract with other companies
for these services. Issuers and processors also may act as program managers, but frequently the
program manager is a third party.
5. Loading network: Reload networks allow cardholders to add funds to their cards by giving cash
to a merchant at a point of sale.
6. Distributor/Vendor: An entity that distributes and markets prepaid cards to consumers.
These six functions come together to reach and serve the customer, as illustrated in Figure 3.
7F ourth Annual Network Branded Prepaid Card Market Assessment, and Sixth Annual Network Branded Prepaid Card Market Assessment,
Mercator Advisory Group, September 2007 and September 2009; and Cardholder Use of General Spending Prepaid Cards, CFSI and
Federal Reserve Bank of New York, February 2007.
8 FDIC Survey of Unbanked and Underbanked Households, Tables A-13 and A-14.

PAYMENT NETWORK
MasterCard® Visa®
Distributor/
Fulfillment & Marketer
Program
Transaction
Card Issuer Manager ACE Cash Express
Processor
MetaBank Account Now Walgreens
FIS
The Bancorp, Inc. GreenDot CVS/pharmacy
FirstData
GE Money NetSpend Walmart
MT&L
RushCard Univision
FSV Payment Systems
Western Union
Loading Networks
GreenDot Western Union MoneyGram Visa ReadyLink MasterCard rePower
Figure 3 – Industry Supply Chain

Note: The names mentioned in this graphic are examples of companies that serve various functions in the prepaid supply chain. This
is not an exhaustive list of all industry players.
Although there are six distinct functions, the lines can blur between the functions because some
companies are vertically integrated, meaning they perform more than one function in the supply
chain. NetSpend is an example of a vertically integrated company. They fulfill and process their
own transactions and manage their own programs, but also market and distribute their cards
directly to consumers online and through distribution partners such as check cashers and grocery
stores. NetSpend also has its own reload network with more than 100,000 reload locations in the
United States. Another example is GreenDot, which serves as a program manager, distributor, and
cash reload network.

Economic Overview of the Industry

To fully educate consumers about prepaid cards and to engage with prepaid card providers, it
is important to have a basic understanding of the economics of the industry and how the various
players make money.
Prepaid cards are generally a low-margin business, meaning profit makes up a small percentage
of revenue. Therefore, a relatively small amount of profit must be divided by all of the parties along
the supply chain. In addition, the fixed costs in technology, systems, process, and new program
setup are relatively high compared with the variable cost associated with adding each new
customer. Primarily, this implies that product volume is important for profitability (Figure 4).
$
Revenue
PROFIT
Total Costs (Fixed plus Variable)
Fixed Costs (high): Cost to set up

systems, relationships, and each
card program
Variable Costs (low): New cost

per each additional cardholder
$0 Number of Active
0 Active Cards Cardholders
Figure 4 – Illustrative Cost Structure for Prepaid Card Industry
Industry revenue comes from a variety of sources, including:

• Card fees (as outlined in Table 2)
• Interchange fees (paid by the merchant to the payment network on each transaction;
averages 2 percent of transaction value)
• Float or interest earned on deposits
• Ancillary products such as fees and interest earned from short-term loans/lines of credit
How the revenue gets divided across all of the players in the supply chain varies by card program.

Legal and Regulatory Issues

Because of the prepaid card industry’s relative youth, the regulatory system governing prepaid
cards is still evolving. Anyone engaged in this space should be aware that regulatory changes
may affect product offerings, pricing, features, and consumer protections. Regulators have
not yet explicitly extended many important consumer protections such as Regulation E9 and
FDIC pass-through insurance to prepaid cards. However, this does not mean these protections
are unavailable—indeed most of the major prepaid card providers operate in compliance with
these regulations. However, you should carefully screen any product offerings to make sure such
protections are included, and advise your clients to do the same.
It is important to evaluate a card’s terms and conditions, in order to make sure that any and all
fees are clearly disclosed and that dispute resolution procedures are straightforward. You should
also ensure that basic account transaction information is available, such as through electronic
statements.
In addition, it is critical to choose a card with FDIC pass-through insurance (which guarantees
that each card is insured as an individual account, and its funds are protected in the event that
the issuing bank fails). To verify that a card is FDIC insured on a pass-through basis, check with
the program manager or card distributor, or contact the issuing bank. To find a card with good
terms, fees and resolution procedures, review the disclosures and card contract carefully, and
compare multiple card offerings, especially if you intend to refer clients to a specific prepaid
card, or distribute cards yourself.
Appendix B contains details on some of the legal and regulatory issues affecting distribution of
prepaid cards. Be sure that your contract with a card issuer addresses these concerns and answers
them to your satisfaction.
For more information on these and other regulatory issues, please refer to CFSI’s policy brief
on prepaid card regulation, forthcoming in late 2010.
9 Regulation E implements the Electronic Fund Transfer Act, which establishes guidelines for account disclosures, error resolution procedures,
periodic statement requirements, and more for accounts involving electronic transactions. Payroll card accounts are subject to Regulation E.
Most issuers of GPR cards offer Regulation E types of protections to cardholders, in addition to the card brands’ zero-liability policies.

Benefits and Issues for Consumers10

What does this mean for the people your nonprofit serves each day? It means that prepaid is a
potentially beneficial product choice for consumers looking to conduct financial transactions and
that you should consider how to best integrate prepaid cards into your organization’s programming.
Prepaid cards are increasingly being marketed to and used by consumers as an entree to or
a substitute for a traditional checking account. Given the variation in consumers’ financial
services needs and preferences, prepaid may not be for everyone. However, for many underbanked
consumers, it can be a great option in helping them meet their short-term needs and possibly in
achieving longer-term savings and credit-building goals.
“It’s like a weight is
being lifted off my To better understand how cardholders view their cards and the benefits cards offer, CFSI
shoulders knowing conducted in-depth interviews with prepaid card users. The points below summarize the benefits
that I don’t have to they described.
carry money on me.”‡ Reduced cost for financial services: Prepaid cards can reduce the cost of basic financial services
for people who have access to direct deposit (either through an employer or government benefit).
This is particularly true when the alternative is paying for check-cashing and bill-payment services,
or using a checking account and incurring overdraft or insufficient-fund fees. CFSI’s June 2009
paper One Size Does Not Fit All: A Comparison of Monthly Financial Services Spending 11 contains
several case studies comparing prepaid card fees to the cost of check cashing or checking
accounts. One of these examples is summarized in the sidebar titled Potential Cost Savings with
“When I used a bank, Prepaid (page 23). Using online bill pay, free balance-inquiry methods (text message, online, etc.),
every time I was and receiving cash back with purchases to avoid ATM fees can also help to keep the costs of the
turning around I prepaid card low.
was being charged Security: Prepaid cards allow consumers to make purchases and pay bills without carrying large
for this or billed amounts of cash.
for that. With my
prepaid card, there Immediate liquidity: Funds directly deposited onto prepaid cards are available immediately,
is none of that. I making prepaid an appealing tool to consumers who typically use check cashers because they
know how much cannot afford to wait for a financial institution to clear a deposit into a checking account.
I spend a month
to use it, and that’s
all there is.”
“I’m deeply grateful

for my prepaid card.
I can buy online; I
can do anything that
a person with good
credit can do.”
10 Except where otherwise noted, the findings described in this section are from the study conducted in A Tool for Getting by or Getting
Ahead? Consumers’ Views on Prepaid Cards, CFSI with Jennifer Romich and Eric Waithaka,
http://www.cfsinnovation.com/topics/article/330566, April 2009.
11 Available at http://www.cfsinnovation.com/publications/article/330606.
‡ Consumer quotes are excerpts from A Tool for Getting by or Getting Ahead? Consumers’ Views on Prepaid Cards, CFSI with Jennifer
Romich and Eric Waithaka, April 2009, and Satisfaction with and Usage of Prepaid Cards, NBPCA/CFSI Survey Results, April 2009.

“I’m not a bank or Transparency and predictability: Fees for transactions and deposits are charged upfront for prepaid
credit card type of cards. The cards are difficult to overdraft and tend to have fewer back-end charges than checking
person. Reloadable accounts. Almost three-quarters of prepaid card users say the fees for using their cards are fair,
prepaid cards give and an even greater percentage say they understand the fees well. These numbers increase even
me the ability to further for consumers who use the cards regularly.12
make purchases.” Convenience: Consumers can make purchases and access funds at any location that accepts the
network brand (e.g., Visa® or MasterCard®) and all hours of the day. Prepaid cards allow customers
to make purchases and pay bills online.
Accessibility: Many underbanked consumers either do not have, or do not perceive themselves
“I rent a car with it, as having, sufficient identification or credit history to open a traditional checking account at a
and that’s major.” financial institution. Prepaid cards do not require a check of consumers’ files with the credit
bureaus or ChexSystems, a reporting agency that catalogs negative bank account actions such
as bounced checks and fraud.
“I think it is more Acceptance/Inclusion: Having a card gives customers a way to pay that does not differentiate them
socially acceptable from other consumers who may be more financially advantaged. Whereas using a money order is
to own/use a credit a visible sign of not having a checking account, the prepaid cards act and look like credit or debit
card, and by using cards.
a prepaid card I Financial discipline: Prepaid cards help consumers limit spending and stay on budget. People
feel more socially can only spend what they have, so it is hard to overdraft or get into debt.
acceptable.”
Build savings: Prepaid cards can help people build savings, particularly if the card has a linked
savings account with automated deposit and/or a competitive APY.
“I primarily use
reloadable prepaid
cards for items like
gas, groceries, and
smaller bills like
phone or Internet
services. It’s easy
to place the money
into the account
during the month
and stay within
the confines of
the budget I have
allotted to spend
for these goods
and services.”
12 S
atisfaction with and Usage of Prepaid Cards, NBPCA/CFSI Survey Results, http://www.cfsinnovation.com/topics/article/330558,
April 2009.

Potential Cost Savings with Prepaid

Ms. J. receives income from six checks each month—two from government benefits programs and four from her
employer—totaling about $1,700. She pays her rent in cash; pays bills for her phone, cable, and car insurance;
and makes about five additional monthly purchases for eating out and groceries.
As shown in the following table, switching from check cashing and money orders to a prepaid card with direct
deposit for could save Ms. J. $20 a month on average. While a checking account could save her an additional
$13, these savings depend on several factors; if Ms. J. made more ATM withdrawals, expedited a bill payment,
or incurred an insufficient funds charge, it could wipe out those savings entirely.13
Check Cashing Prepaid Checking Account

Services Average Cost Services Average Cost Services Average Cost
Six Checks Cashed 51.45 Two Direct Deposits 0.00 Six Deposits 0.00
Three Money Orders 4.50 Four Checks Loaded 21.85 3-6 ATM Fees, plus 3 Checks 23.90
Cash Withdrawal 4.50 Total Before Fees $23.90
(Rent Payment)
Three Bill Payments 1.50
Expedited Bill Pay 9.50
Eating Out and Groceries 2.50
Insufficient Funds 19.00
Monthly Fee 6.48
Total $55.95 Total $36.83 Total With Fees $52.40
13 F
or more comparison of Ms. J’s options, and for other financial services cost comparisons, see One Size Does Not Fit All: A Comparison of Monthly Financial
Services Spending, http://www.cfsinnovation.com/publications/article/330606, June 2009.

Part II: O
pportunities For Nonprofits To Engage With Prepaid
Now that you have a strong working knowledge of prepaid cards, it is time to turn our attention
to opportunities for nonprofit organizations to incorporate prepaid cards into their programming.
The Engagement Continuum

Nonprofits can choose from a continuum of options on engaging with the prepaid industry, as
illustrated in Figure 5. The options range from providing information and education about prepaid
cards to operating an independent financial services business with prepaid as just one part of a
broader product suite. The options fall into four main categories:
1. Information
and education: Provide general information about prepaid card products;
incorporate prepaid into financial education curriculum or counseling programming.
2. Partnership
and referral: Refer clients directly to specific product(s) available in the
marketplace; develop a formal partnership with a prepaid provider to refer clients.
3. Distribution: Partner with a prepaid card provider to become a distributing agent of the product.
4. Service
provision: Provide a suite of financial products and services that reaches beyond
prepaid cards. This might entail becoming a prepaid card program manager, operating a money
services business or starting your own financial institution. This category of options is beyond
the scope of this guide.
These categories increase in complexity as you move from left to right across the continuum.
Degree of Intensity
Provide
Develop
Answer information Own and
Direct partnership
basic and Distribute operate
clients to to formally
questions educate prepaid financial
specific connect
about clients cards2 services
product(s) clients and
products about business3
providers1
products
Information Referral and Service

Distribution
and Education Partnership Provision
1. “Develop partnership…” includes helping with outreach and providing customer follow-up, while the provider delivers the product.
2. “Distribute prepaid cards” includes the full process from marketing to enrollment to ongoing customer service.
3. “Own and operate financial services business” includes distributing prepaid cards as part of a broader product suite.
Figure 5 – Continuum of Prepaid Engagement
How your organization ultimately engages with prepaid will depend on its mission, core
competencies, capacity, and interests. No single option fits every organization.

Part II: OPPORTUNITIES FOR NONPROFITS TO ENGAGE WITH PREPAID
This guide is designed to present a range of options and a series of critical questions and issues
that will assist you in deciding the best approach for your individual organization. Choosing the
proper approach is not a science, and the best course of action may not be readily apparent. CFSI
recommends comparing several options against your organizational realities and to err on the side of
conservatism in terms of your capabilities and expectations. Below is a list of key strategic questions
to consider and discuss across your organization before you select an engagement approach.
Key Considerations in Choosing an Engagement Strategy

What is your organization’s mission? If your organization’s mission involves promoting financial
inclusion and helping consumers achieve financial prosperity (or something closely related),
engaging with prepaid cards likely makes sense. Otherwise, getting too involved with prepaid might
result in mission drift and unsatisfactory outcomes.
What are your organization’s core strengths and competencies? Does prepaid directly tie in, or
is it a logical enhancement to your pre-existing programming? If your core strength is education,
it may make sense to limit your involvement with prepaid to providing information, education,
and referrals. To be successful with the more advanced options, consumer financial services
should be a main focus and core competency of your organization. In particular, if you are
considering distribution, we recommend past experience with marketing and outreach, building
and maintaining for-profit partnerships, and delivering financial products. Therefore, we expect
distribution to be the best approach for only a limited number of organizations.
What are the specific financial services needs (immediate and longer-term) of the populations
you serve, and does prepaid help meet those needs? Before you settle on an engagement strategy,
it is critical that you develop a firm understanding (possibly through focus groups, interviews, or
surveys) of your clients’ financial services needs, preferences, and behaviors. Otherwise, you could
offer or refer them to a product that provides little value. CFSI’s research has shown that prepaid
cards seem to especially appeal to and work well for consumers who have direct deposit, previous
experience with account-based products, a stable income and housing situation, and comfort
using the Internet. Clients without these characteristics may find little value in a prepaid card.
The worker center case study in Appendix A describes one nonprofit’s experience conducting a
customer segmentation analysis.
Is integrating prepaid into your organization’s programming a priority for your organization?
Is there buy-in for this effort among the board, senior management, and staff?
You need a high level of enthusiasm and a long-term commitment to make whatever option
you choose a success, especially if you choose distribution. Ideally, you would have a prepaid
“champion” or project leader tasked with ensuring your organization is successful with whatever
approach you take.

How much capacity does your organization have to take on this effort? The further to the right
on the continuum you move, the more organizational capacity you will need to successfully
incorporate prepaid into your programming. For instance, adding prepaid to your financial
education curriculum will likely require only the upfront investment of staff time to learn about
the product and to update lesson plans. However, if you choose to actively partner with a
prepaid provider to do outreach and marketing or to distribute cards, capacity demands increase
significantly. CFSI’s experience suggests that you need at least one to two full-time staff members
for a successful launch and maintenance of a distribution program.
What financial resources do you have to devote to this effort? What are your expectations around
financial sustainability? As you move from left to right across the continuum, the options require
more financial resources. Providing information or educating clients about prepaid may not
require hiring additional staff, but an active partnership or card distribution program will, thereby
increasing your organizational expenses. Nonprofits sometimes see engagement in prepaid
as a path to financial diversification and sustainability. We recommend caution with this line
of thinking. It is unlikely that there will be funding available beyond traditional foundation or
government grant support for efforts to inform or educate consumers about prepaid. Similarly,
if your organization wants to distribute prepaid cards as a social venture, you should look closely
at revenue generation and the true cost of operating the program. To make the project self-
sustaining, you would need to negotiate revenue sharing with the prepaid card provider and then
enroll and keep active thousands of cardholders—an unfeasible undertaking for many small to
midsize organizations. We suggest you make conservative assumptions when planning, strive for
sustainability in your business model, and approach card distribution as a source of long-term
benefit rather than short-term profit. A partnership and referral approach may offer an opportunity
to earn a commission from the card provider for client referrals. Providers commonly pay other
companies for customer referrals or spend money directly on customer acquisitions themselves
(costs often range from $50 to $250 per new acquired customer). It may be possible to negotiate
a fee for each new active customer you deliver to help offset your costs.

Levels of Engagement with Prepaid Cards

The next section provides details on the levels of engagement and tips for succeeding with
each option.
Information and Education

This option might be a good fit for your organization if:
• The mission is tied to consumer financial services.
• Financial education, counseling or coaching is your core competency.
• You have limited financial resources or capacity to devote to the effort.
• You clients have diverse financial service needs and preferences, but you believe prepaid
could be a useful product for a segment of them.
Examples of the types of nonprofit organizations that might be well-suited

for this option:
• A nonprofit organization that provides financial education introduces prepaid cards as an
alternative to checking accounts in the training curriculum.
• A nonprofit social service agency with a broad mission is prepared to answer client questions
and to provide basic information about the product.
Description:
A nonprofit organization working in consumer financial services, asset building, financial education
or a related field should have a basic understanding of prepaid in order to respond to clients’
questions as prepaid cards become more prevalent in the marketplace. Be prepared to answer
basic questions such as: Where can I get a card? How much does a prepaid card cost? How do
I use it? How can I reload it? Nonprofits have choices about how much information they
provide and how deeply they educate their constituents on this issue.
Organizations that provide financial education or individual financial counseling or coaching should
incorporate information about prepaid cards into their curriculum or programming. This should
include how the cards work, fee structures, how to compare cards, and help in assessing the
product’s benefits given the client’s needs and preferences. If the client goes on to purchase a card,
you should help cardholders maximize the benefits of the chosen product(s). For example, you might
help them in accessing their accounts online to check balances, monitor fees, pay bills, etc.

Tips for success with information and education:

1. Know your client and focus your program accordingly: Understand clients’ specific needs and
concerns, and focus your informational and educational subject matter accordingly. Relevant
information will better position you to capture people’s attention and motivate them to change
their behaviors. For instance, if most of your clients have never had a transactional account and
currently use check cashers, you may need to spend more time stressing the benefits of having
an account (e.g., safety, security, possible cost savings over check cashers, etc.).
2. Provide interactive materials: Worksheets and online comparison tools will help clients decide
if a prepaid card is right for them and allow them to compare features and fees between cards.
3. Follow up with clients and provide ongoing support: Check in with clients who have received
information to see if they have enrolled, how they are using the card and what additional details
they need. This will create accountability for cardholders, provide valuable feedback for your
program and allow you to track the results of your efforts.
4. Do your homework: Keep current with developments in the prepaid industry, including the most
common products in your community, the range of fees, new features, etc.

Referral and Partnership

• Prepaid cards align with the needs of a significant number of your clients.
• You want to make your financial education programming actionable, resulting in behavior
change and increased knowledge.
• You have a moderate level of resources to devote to the project.
• Consumer financial services are a key focus area for your organization.
• Marketing, outreach, and partnership development are core strengths of your organization.
Examples of the types of nonprofit organizations that might be well-suited for this option:
• A nonprofit that already refers clients to low-cost checking accounts and wants to add low-cost
prepaid cards to the list of recommended products.
• A nonprofit credit counseling agency that seeks an alternative payment product and budgeting
tool for consumers who have encountered trouble with credit cards.
• A nonprofit affordable housing provider that seeks a more efficient way to collect rental
payments from unbanked clients, while simultaneously promoting residents’ financial stability.
Such an organization might be well-suited for distribution, depending on its core competencies,
financial resources, and capacity.
• A nonprofit workforce development organization that seeks a method for its clients to receive
direct deposit of paychecks, which many (potential) employers prefer.
• A nonprofit domestic violence agency that seeks a quick method to provide abused women
access to emergency cash.

Description:
Nonprofit organizations whose clients could benefit from prepaid cards might consider making
referrals to a particular product or set of products with an appropriate combination of low fees,
security, transparency and features. They could also formally partner with one or more prepaid card
providers to assist with product marketing, customer acquisition, and ongoing service and support.
There are many different partnership models. Roles and responsibilities between the nonprofit and
the card provider will depend on the partners’ core competencies and capacity.
If your organization already provides financial education, counseling, or coaching, CFSI
recommends you consider the referral or partnership option, as it could be a logical addition
to existing services. Our research and experience suggest that financial education will be most
effective if it is closely coupled with access to financial products and services, so that clients can
more easily put knowledge into practice.14 Directly combining access to a financial product such
as a prepaid card with education makes it more likely that you will spur positive behavior changes
and see improved financial outcomes among your clients. Pursuing the referral/partnership option
versus the distribution option also allows you to remain focused on your core competency—
education—rather than overextending yourself into areas where you lack experience and expertise.
You can rely on your prepaid card provider partner to do what they do best—namely, delivering a
card product.
Increasingly, prepaid card providers are interested and willing to partner with nonprofit
organizations. Many providers understand that there is a general lack of awareness and
understanding around prepaid cards, and they are looking to expand their reach. Nonprofits can
potentially be helpful on both fronts. It is important in the partner engagement process that you
sell your organization and the additional value you can offer to the provider’s business. Often,
this involves assisting the provider in acquiring new customers and providing ongoing customer
education and service. Industry also increasingly recognizes the important role of nonprofits in
shaping public discourse and opinion about the product. Accordingly, they embrace nonprofits
as prepaid champions, promoting cards among potential users and policy makers.
14 CFSI recently completed research to assess the current financial education landscape and determine the types of educational efforts
that are most effective in changing behaviors and improving financial outcomes for underserved consumers. CFSI found that the most
effective interventions are those that are immediately relevant to consumers’ lives, coincide with key life events or moments of financial
decision, allow them to execute newly gained knowledge into action immediately, and help consumers acquire and preserve assets
over the course of their lives. To read the complete findings see From Financial Education to Financial Capability: Opportunities for
Innovation, http://cfsinnovation.com/publications/article/440486.

Tips for success with referral and partnership:

1. Know your client: You should have a close read on your clients’ financial services needs
and preferences in order to refer them to the appropriate product(s).
2. Develop
the ability to effectively assess and screen prepaid products: Before you refer clients
to a prepaid product(s), it is essential that you vet the products. You do not want to refer clients to
a product that will ultimately end up costing more or is of little or no value to them. This requires
someone on your staff to become highly knowledgeable about prepaid cards. Staff can select
products that meet clients’ needs in a convenient and cost-effective way, and also provide them
with savings and credit-building opportunities. Nonprofits must decide how many card products they
want to recommend and the exclusivity of a partnership they are willing to enter. For instance, you
could establish criteria and develop a resource list including all of the prepaid products available in
your community that meet those standards. You could then provide as much guidance as needed for
clients selecting a product. Alternatively, you could select one prepaid card provider and enter into
an exclusive partnership to endorse a single product.
3. Select a strong partner and set clear roles, responsibilities, and expectations for the
partnership: If you choose the partnership option, it is essential to find a partner who shares your
understanding of your clients’ needs and is committed to serving those needs. (For more details
on partner selection, see distribution section, page 32 and Appendix C.) You should clearly define
responsibilities and expectations at the outset to avoid future problems. Clarify your role in product
marketing, client acquisition, enrollment, and ongoing customer service and support. Finally, agree
on what the prepaid card partner is willing to provide in return. In some cases, this might involve a
financial contribution or revenue- and data-sharing arrangements.
4. Secure a written agreement about data sharing: For nonprofits interested in tracking outcomes
and assisting clients in successfully managing financial products, data sharing is essential. Clients
can authorize nonprofits’ access to their account information to monitor detailed transactional data
and how clients use their cards. This allows you to assist clients that run into trouble or provide
encouragement and information about future opportunities to clients who stay on track. Because
prepaid card companies can be reluctant to share information, you should emphasize the value you
add and the ways in which you can help your clients become their top customers.

Distribution
• Prepaid is a strong fit for a large enough number of your clients to justify your investment
of time and resources.
• Consumer financial services are central to your organization’s mission, and you are committed
to including a prepaid card program.
• You have strong leadership and sufficient capacity, financial resources, and physical space
to successfully launch the initiative.
• Your organization is known by clients as a place to address financial issues.
• You have a strong business sense, are savvy about the prepaid card industry, and have past
experience with marketing, delivering, and servicing consumer financial products.
• You are patient, comfortable taking risks, and effective in managing nonprofit/for-profit
relationships.
• You have a commitment to customer tracking and follow-up.
Examples of the types of nonprofit organizations that might be well-suited for this option:
• A nonprofit tax preparer looking for product solutions to help unbanked consumers receive
electronic refunds. (See the VITA case study in Appendix A for a real-world example.)
• A nonprofit lender looking for an entry product for unbanked clients that they must turn
down for loans.
• A union with a large membership that seeks to provide a useful transaction product both
to promote financial prosperity and facilitate dues collection.
Description:
The prepaid card industry uses many different channels to market and distribute cards
to consumers—the Internet, banks, employers, retailers, and direct sales. A few nonprofit
organizations have also begun serving as distributors of prepaid cards. Distribution is a major
commitment, but some organizations may decide that it complements their existing programs
and services and will enhance their ability to achieve their missions.

Client
Know your clients!
Understand their needs,
and the potential size of
the market for your card.
Realistic
Card offering organizational
that meets approach that
clients’ needs meets clients’
needs
Product
Partner Organization
Distribution should fit with
Pick a strong partner
your core competencies,
with realistic expectations for
align well with your mission,
product volume, a long time
and be a high priority for
horizon, and an excellent Shared senior management and
product. expectations, key team members.
understanding
of roles and
responsibilities
Figure 6 – Requirements for a Successful Card Offering
A successful card offering requires a deep understanding of your clients, the capabilities of your
organization, and a strong product partner, as illustrated in Figure 6.

Tips for success with distribution:

Distribution requires more intense effort and commitment, more resources, and broader and
deeper competencies than the previous two options. Therefore, CFSI recommends this approach
for a limited number of nonprofit organizations that are truly well-suited for this type of work.
1. Know your client: To be successful with distribution, it is essential that you fully understand
your clients’ financial services needs, practices and preferences; and that you select a prepaid
card product with the fees and features that will appeal to the majority of your client base. For
the effort to be self-sustaining, most nonprofits would need to enroll and maintain thousands
of active cardholders.
2. Select a strong product partner: Because operational problems are to be expected, seek out
a partner you can count on to execute your agreement faithfully—one that has patience and
will remain over the long term. Be sure you and your product partner are aligned on the needs
of your clients. You should share common and realistic expectations of product volume and
financial benefit to each party. Establish a clear understanding of responsibilities on customer
service and client problem-solving, so staff time is not consumed with problems that only the
program manager can address. Appendix C provides more details on desired characteristics of a
prepaid card partner, as well as various processes you can use to identify a partner. Be prepared
to clearly articulate the value you can add to a company’s bottom line (e.g., reducing marketing
costs, customer acquisition, and customer education and support costs). Additionally, as
prepaid is a scale business, you will likely have more success engaging a product partner if you
can produce a significant volume of new cardholders (i.e., thousands if not tens of thousands).
If your organization cannot singlehandedly achieve such numbers, we encourage you to think
about joining efforts with other nonprofit organizations to aggregate the volume.
3. Be vigilant in your contract negotiations with your selected partner and engage legal counsel
for advice in the process: Be mindful of what your partner says they “can” or “will” do as
compared with what they are currently doing. Get written commitments of what the partner
will provide in terms of the product offering, data sharing, staff training, marketing materials,
technical support, customer service, etc. Becoming a distributing agent for a financial product
requires you to abide by state and federal laws and financial services industry regulations.
Appendix B provides more detail on the types of legal and regulatory issues you are likely to
encounter. It is imperative that you work closely with an attorney if you decide to enter your
own arrangement with a prepaid card provider to distribute cards.15
4. Avoid product customizations: Nonprofits often desire customizations to the product offerings
currently available in the marketplace, such as reduced fees, co-branding, proprietary cash-
loading networks, etc. Although you might feel such customizations are necessary to meet the
needs of your clients, it is likely that they could increase costs, cause operational challenges,
and possibly create confusion.
5. Educate and engage staff with the card: Your staff will be better able to sell cards if they have
hands-on experience with the product. Consider paying part or all of employee salaries via
direct deposit onto the product. Designate a “card expert”—a go-to person for more complex
questions from staff and clients. Additionally, consider providing your staff with incentives for
registering card users, but be sure to link success metrics to card usage and retention.
15 The nonprofit social justice organization Appleseed’s report Understanding Prepaid Card Partnerships: A Guide for Nonprofit Organizations
in New York provides information on the potential compliance responsibilities nonprofits might face when partnering with prepaid card
providers, as well as considerations when negotiating a contract.
See http://ny.appleseednetwork.org/LinkClick.aspx?fileticket=Ghvb_f7S6fA%3D&tabid=628, pages 20-29.

6. Resolve operational issues early: Have your staff test the product to make sure it functions as
anticipated. Your organization’s reputation depends on satisfaction with the card. You’ll need
the ability to enroll customers easily and efficiently, deliver cards consistently and provide
strong customer service.
7. Promote direct deposit: Prepaid cards are often more useful, convenient, and affordable for
those who use direct deposit. Incentives such as reduced or waived fees can help motivate
clients to take action.
8. Be patient: It can take multiple interactions with clients to educate them about the product
before they are ready to enroll. Develop a strong system for client tracking and follow-up to
improve efficiency during what can sometimes be a long and frustrating engagement process.

Conclusion
We hope this guide provides an improved understanding of prepaid cards and the ways nonprofit
organizations can help connect underbanked consumers to this useful financial product. In the
coming years, an increasing number of nonprofit organizations will inform and educate consumers
as awareness grows and prepaid cards become more popular. CFSI also believes that a large
number of organizations are in an excellent position to refer or connect consumers directly to
products to make education actionable and more effective. And for a much smaller subset of
organizations, we hope to see stronger and more successful distribution programs. Ultimately,
we hope this guide will be a valuable resource to nonprofits and that they will use the information
to promote the financial capability and prosperity of underbanked consumers.

Appendix A: Case Studies
Understanding Clients’ Financial Services Needs
Beginning in 2008, a national group of immigrant worker centers led by the Center for Community
Change in Washington, D.C., joined together to offer a prepaid card to their members. Prior to
launching the card, the centers used surveys and interviews to gauge their clients’ interest in
prepaid cards. Many clients expressed interest, particularly around the idea of having a Visa®
or MasterCard®-branded card product to conduct financial transactions. However, once the
worker centers began distributing cards, member interest and enrollments were far below their
projections. The worker centers then did a more detailed customer segmentation analysis to better
understand the misalignment. The results are illustrated in Figure 7 on the next page.
Ultimately, the worker centers discovered that while the majority of their clients expressed interest
in the cards in theory, the reality of their financial situations dictated that they were unlikely to
derive tangible benefit from the prepaid product. Consequently they never signed up, or if they did,
they never became active users. In most cases, this was due to users’ extremely low incomes and
the instability of their work and living situations. This example demonstrates the importance of a
deep understanding of your clients’ financial services needs, preferences, and current behaviors.16
16 The Worker Center Collaborative’s experience provides several other valuable lessons as it relates to nonprofit distribution of prepaid
cards, detailed in the CFSI Learning Brief, Alliance to Develop Power’s Worker Center Collaborative,
http://cfsinnovation.com/system/files/ADP%20Learning%20Brief%20Final%2011-30-09.pdf

Unemployed Day Laborer Stable worker Permanent Job Permanent Job

and Homeless in shelters or paid, in cash or paid by payroll paid by payroll
with Friends check, shared check, pays check, pays
Income:
rent lease lease
Extremely Low Income:
Member <$6,000 Annual Very Low Income: Income: Income:
Profile $5-10,000 Annual Low $10-15,000 Low $15-20,000 Low $15-20,000
No Access to
Annual Annual Annual
Direct Deposit No Access to
Direct Deposit Unlikely to have Likely to have Likely to have
access to Direct access to Direct access to Direct
Deposit Deposit Deposit
Underbanked Deposit Account Only
BANKING
Unbanked/Previously Banked U.S. Born
SEGMENTATION
Unbanked/Never Banked Recent Immigrant
Savings, Bill Pay, Direct Deposit

Education & Access (Reloadable Debit Card)
“Unbanked” Add on Products

“BANKING” Education & Access (Auto Insurance, Tax Prep, Pay Day Loan)
NEEDS
PROGRESSION “Unbanked” Cash Transactions
(Check Cashing, Money Orders, Remittance, Bill Payment, Phone Cards)
Did not derive tangible benefit Likely to derive tangible benefit

from the reloadable debit card from the reloadable debit card
The segmentation analysis organizes worker center clients along a spectrum of income and financial sophistication.
Figure 7 – Worker Center Customer Segmentation/Financial Needs Progression

One Nonprofit’s Distribution Experience

Prepaid cards represent a compelling opportunity for nonprofit organizations that provide free
tax-preparation services (Volunteer Income Tax Assistance or VITA) to low-income tax filers. Direct
depositing onto a prepaid card expedites the receipt of income tax refunds while giving unbanked
or underbanked taxpayers a lasting financial tool to avoid check-cashing fees and to conduct
transactions year-round. For-profit tax preparers such as H&R Block and Jackson Hewitt have
identified this strong value proposition and have issued millions of prepaid cards.
Recognizing the need and opportunity, the Rochester, N.Y.-based Empire Justice Center/CASH
Coalition began offering a prepaid card in partnership with Community Financial Resources. The
staff at major CASH sites includes an asset specialist, a member with detailed knowledge about
the prepaid card offering, which has been an important part of CASH’s success to date. In the
past two years, CASH has issued more than 750 cards to its clients, and early data suggest that
35–40% of those clients sign up for ongoing direct deposit of paychecks. However, the effort to
distribute cards has encountered some challenges. CASH had initial difficulty finding a product
partner with a straightforward, affordable card offering and informative marketing and educational
materials. It also had too few asset specialists at the outset to cover all of its sites. CASH is now
working to increase the percentage of cardholders that use direct deposit and determine how they
can encourage year-round card usage, as client interactions are currently limited to the tax season.

Appendix B: Legal and Regulatory Issues
Legal and Regulatory Issues that Impact Nonprofit Prepaid
Card Distribution
If your organization decides to distribute prepaid cards, you must comply with relevant state and
federal banking and anti-money laundering laws. You will most likely contract with commercial
entities to issue and process cards. The contract should delineate which party is responsible
for licensing, insurance, risk management, security, recordkeeping, and compliance with the
applicable laws and regulations. It is essential to work with an attorney who understands the
industry as you negotiate your contract, and to ensure legal and regulatory compliance.
Some of the key issues that you might encounter are summarized below:
1. Identification documents: The Know Your Customer section of the USA Patriot Act requires
that financial institutions verify the identities of their customers. A nonprofit acting as an
agent of a prepaid card company will need to undertake this responsibility, which includes
collecting and storing the identification documents. Some banks are more flexible in the types
of documentation they will accept to verify an identity, and if flexibility is a consideration for
the target population, it is important to find a bank that accommodates this. Also, it is critical
to know what data must be stored, and by whom; if the data is considered disclosable and if
so, what can be disclosed and by whom.
2. Privacy: As bank products, GPR cards are subject to the privacy and security requirements
of the Gramm-Leach-Bliley Act (GLBA), as well as the Payment Card Industry Data Security
Standards. To the extent a nonprofit possesses any nonpublic information about a cardholder,
the nonprofit must comply with the privacy and security requirements of the GLBA.
3. MSB licenses: Non-bank financial services entities, or money services businesses (MSBs)
include remittance companies, cash-loading sites, money order issuers, and check cashers.
MSBs are regulated at both the federal and state level. The rules vary by state, but an entity
that intends to accept cash for reloading may need an MSB license for the state in which it
will operate. At the federal level, MSBs must register and report certain suspicious activities.
MSBs must maintain an anti-money-laundering program that includes, at minimum, verifying
customer identification. A partnership or a business contract with an MSB may entail certain
legal requirements to ensure compliance with federal and state MSB laws.
4. Other licenses: The nonprofit or card provider needs any licensing required by law, such as a
money transmitter license or a bond to pay any claims in case of insolvency. If the nonprofit
acts as an agent of the card issuer by providing certain services, such as opening accounts,
accepting funds and payments, and loading cards, then the licensing requirements likely
apply to the nonprofit.
5. Recordkeeping: Certain relationships with card issuers may trigger recordkeeping requirements
and reporting. This relates to the privacy issue addressed in #2 above.
6. Tax-exempt status: It is important that a prepaid card program will not jeopardize the
nonprofit’s tax-exempt status. Seek legal assistance to ensure prepaid card activities are not
subject to Unrelated Business Income Tax.
7. Fraud prevention: The nonprofit will need written policies and procedures designed to safeguard
confidential client information.

Appendix C: Selecting a Partner
Selecting a Prepaid Card Provider Partner
As described in the Distribution section, it is essential that you select a strong prepaid card provider
partner to be successful. This appendix provides the characteristics that CFSI suggests you look for
in a partner, as well as various paths you can take to identify potential partners.
Desired Characteristics
1. Experience:
Look for a vendor that has been in operation for at least two years (ideally more)
and a proven track record in providing a high-quality product to satisfied customers.
2. Financial stability: The majority of prepaid debit card vendors are not publicly traded companies,
and those that are usually exist as a segment of a much larger business. If it is not publicly
traded, sign a non-disclosure agreement and ask the company for audited financial statements.
Look for a positive cash flow and strong financial position.
3. Commitment to prepaid cards: A company in which prepaid cards are a core part of its business
strategy is more likely to stay committed to the product and the partnership. It is an advantage
if your partner already offers a product with features that align with your clients’ needs,
because it likely means less need for customization.
4. Size: If the vendor is too large relative to your project, you run the risk of being insignificant to
that vendor. If the vendor is too small, it may not have the resources you need and may run the
risk of going out of business.
5. Cost: Factor in both the price of the product for consumers as well as the amount of revenue
share you will get as an organization. There is an inherent trade-off here. The lower the prices
for consumers, the less revenue the card generates.
How to Identify a Prepaid Product Provider

There are three primary paths you can take to identify a product provider:
1. Issue a request for proposals (RFP): An RFP can be costly and time-consuming, but it may be
worthwhile if you expect to generate a large volume of cardholders (i.e., tens of thousands at a
minimum). With an RFP based on clear, objective criteria, you can compare potential partners
and perhaps cause them to compete for your business.
2. Form an alliance with other nonprofits: You can join efforts with other nonprofits that are
already offering prepaid cards. For instance, through the Aspen Institute’s AssetPlatform
(http://assetplatform.org), nonprofits can offer their clients a prepaid card provided by the
nonprofit program manager Community Financial Resources (CFR).
3. Select and individually approach a small number of prepaid card providers: This approach
requires you to do your homework and to identify firms that ideally have a proven track record
or a keen interest in working with nonprofits. Consider talking with program managers that
aggregate smaller nonprofits to reach a sustainable volume. For instance, program managers
such as ADVENT Affordable Financial Solutions focus on aggregating prepaid volume from
nonprofit Volunteer Income Tax Assistance (VITA) sites across the country.
Your capacity for screening and negotiating contracts with product partners as well as your
anticipated volume will ultimately determine the best partner identification approach.

About CFSI
The Center for Financial Services Innovation is the nation’s leading authority on financial services
for underbanked consumers. Since 2004, its programs have focused on informing, connecting,
and investing—gathering enhanced intelligence, brokering, and supporting productive industry
relationships, and fostering best-in-class products and strategies. CFSI works with leaders
and innovators in the business, government, and nonprofit sectors to transform the financial
services landscape. For more on CFSI, go to www.cfsinnovation.com.
About the Sponsors

NetSpend Corporation
Austin-based NetSpend Corporation, a pioneer in card-based alternative financial services since
1999, is one of the only companies in the country with a stated mission to develop products and
services that help the millions of underbanked consumers in the U.S. manage their finances, save
time and money, and ultimately become “self-banked.” All NetSpend products are FDIC insured
and issued by federally regulated financial institutions. More information on NetSpend can be
found at their website, www.netspend.com, or by following the company on Twitter or Facebook.
NBPCA
The Network Branded Prepaid Card Association (NBPCA) is a group of diverse organizations that
combine to deliver network branded prepaid cards to consumers, businesses, and government.
A nonprofit trade association, the NBPCA promotes education and collaboration with government,
media, and consumers. It also works with members to establish and encourage best practices to
benefit card users and industry participants. The NBPCA’s members include financial institutions,
card organizations, processors, program managers, marketing and incentive companies, card
distributors, law firms, and media. More information about NBPCA and prepaid cards can be
found at www.nbpca.com.
The Annie E. Casey Foundation

The Annie E. Casey Foundation is a private charitable organization dedicated to helping build
better futures for disadvantaged children in the United States. It was established in 1948 by
Jim Casey, one of the founders of UPS, and his siblings, who named the Foundation in honor of
their mother. The primary mission of the Foundation is to foster public policies, human-service
reforms, and community supports that more effectively meet the needs of today’s vulnerable
children and families. In pursuit of this goal, the Foundation makes grants that help states, cities,
and neighborhoods fashion more innovative, cost-effective responses to these needs. For more
information, visit the Foundation’s website at www.aecf.org.
2230 Michigan Avenue, Suite 200

Chicago, IL 60616
312.881.5856
www.cfsinnovation.com
©2010 | CENTER FOR FINANCIAL SERVICES INNOVATION

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The Nonprofit’s Guide to Prepaid Cards

Brought to you by the Center for Financial Services Innovation

Who Should Read This Guide?

What This Guide Does Not Include

The Nonprofit’s Guide to Prepaid Cards 2

The Nonprofit’s Guide to Prepaid Cards 3

Part I: Prepaid Primer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Part II: Opportunities for Nonprofits to Engage with Prepaid. . . . . . . . . . . . . . . 24

Appendix B: Legal and Regulatory Issues that Impact Nonprofit

The Nonprofit’s Guide to Prepaid Cards 4

The Nonprofit’s Guide to Prepaid Cards 5

A Role for Nonprofit Organizations

About This Guide

The Nonprofit’s Guide to Prepaid Cards 6

The Nonprofit’s Guide to Prepaid Cards 7

Travel General Purpose Reloadable*

One-time use Reloadable

Figure 1 – Types of Prepaid Cards

The Nonprofit’s Guide to Prepaid Cards 8

How Do Prepaid Cards Work?

Direct Deposit General Spending Savings ATM Withdrawal

Loading Networks Retail Point of Sale

Figure 2 – How Prepaid Cards Work

The Nonprofit’s Guide to Prepaid Cards 9

Table 1A – Basic Card Features

The Nonprofit’s Guide to Prepaid Cards 10

Table 1B – Advanced Card Features

4 For more information about PRBC, see http://www.microbilt.com/nontraditional-credit-report.aspx.

The Nonprofit’s Guide to Prepaid Cards 11

Short-Term Loans/Line of Credit

The Nonprofit’s Guide to Prepaid Cards 12

Table 2 – Common Prepaid Card Fees

The Nonprofit’s Guide to Prepaid Cards 13

How Do Prepaid Cards Compare with Other Payment Products?

The Nonprofit’s Guide to Prepaid Cards 14

Comparison with Other Transactional Products

The Nonprofit’s Guide to Prepaid Cards 15

A Note About Wage Garnishments

Overdraft Protection on Prepaid Cards

The Nonprofit’s Guide to Prepaid Cards 16

The Prepaid Industry

The Nonprofit’s Guide to Prepaid Cards 17

Figure 3 – Industry Supply Chain

The Nonprofit’s Guide to Prepaid Cards 18

Economic Overview of the Industry

Total Costs (Fixed plus Variable)

Fixed Costs (high): Cost to set up

Variable Costs (low): New cost

Figure 4 – Illustrative Cost Structure for Prepaid Card Industry

Industry revenue comes from a variety of sources, including:

The Nonprofit’s Guide to Prepaid Cards 19

Legal and Regulatory Issues

The Nonprofit’s Guide to Prepaid Cards 20

Benefits and Issues for Consumers10

“I’m deeply grateful

The Nonprofit’s Guide to Prepaid Cards 21

The Nonprofit’s Guide to Prepaid Cards 22

Potential Cost Savings with Prepaid

Check Cashing Prepaid Checking Account

The Nonprofit’s Guide to Prepaid Cards 23

The Engagement Continuum

Information Referral and Service

Figure 5 – Continuum of Prepaid Engagement

Appendix B: Legal and Regulatory Issues that Impact Nonprofit

Travel General Purpose Reloadable*