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A
stored-value card represents
money
on deposit with the
issuer,
and is similar to a
debit card.
One major difference between stored value cards
and debit cards is that debit cards are usually
issued in the name of individual account holders,
while stored value cards are usually anonymous.
The
term stored-value card is usually a misnomer, as
most
indicia
of the cards' value are maintained on computers
affiliated with the card issuer.
The
value associated with the card can be accessed
using a
magnetic
stripe embedded in the card, on which the card
number is encoded; using radio-frequency
identification (RFID);
or by entering a code number, printed on the card,
into a
telephone
or other numeric
keypad.
Typical applications of stored-value cards include
transit system
farecards,
gift cards,
and telephone prepaid calling cards. Gaining
acceptance is the payroll card used to pay
employees.
Transit system farecards are popular with
passengers because they eliminate the need to
fumble with money when entering (or exiting)
buses,
subway trains,
etc.
Many transit system operators have implemented
farecards because they can accurately track system
usage; they are useful for charging different
fares depending on the distance traveled; they can
automatically discount fares for seniors and
persons with disabilities; and passengers can in
some cases replace them if they are lost, stolen,
or damaged. The tracking characteristic has
implications for
privacy:
if a card can be matched to an individual
passenger, its usage history can reveal when and
where the passenger has traveled.
Gift cards have all but replaced
gift certificates
in some places, can be purchased in various
values, and are good at various shopping, dining,
and entertainment establishments. They are usually
anonymous and no refund is available if they are
lost or stolen. Also, issuers profit from the
interest or
float
that is earned between the time of purchase and
the time of use. Gift cards are sometimes referred
to as "closed loop" cards in the business as they
can only be used at the merchant who issued it.
In
some cases, gift cards are rechargeable. This
means that many purchases are made with gift
cards, which a customer then recharges when they
get low. This spares both parties the difficulties
of dealing with small change.
A
Stored value credit card is similar to a gift
card. They feature a
credit card
logo such as
Visa
or
MasterCard
and can, unlike gift cards, be used anywhere a
Visa or Mastercard may be used. They are very
similar to a debit or check card except that they
don't require a checking account to be issued one.
They have been heavily marketed in the
United States
as a safe and responsible means for parents to
give their children some spending power which is
why they sometimes are referred to as teen cards.
These cards are also sometimes referred to as
"open loop" cards. Stored value credit cards are
usually not anonymous. They have to be enrolled
under the cardholder's name and are mailed by the
issuer to the cardholder's address.
A
variation on this are the
3V
cards issued in the
Republic of Ireland.
These consist only of a card number plus expiry
date and
verification number,
so can only be used for
customer not present
transactions.
The
Tobacco Card
has undergone testing and is scheduled for
nationwide introduction in
Japan
in 2008. It will contain an IC with information
about the cardholder's age, and will be required
for purchasing cigarettes from vending machines.
It will have stored-value capability.
Payroll cards are used by employers to pay
employees. The employee is issued a card that
permits access to an account established by the
employer. At the end of each pay period, the
employee's ability to draw money from that account
is increased by the amount of his or her wages.
The card may be used at an
Automated Teller Machine
(ATM) to obtain cash, and, in some instances, may
be used at a store to pay for goods purchased. The
payroll card is particularly useful for employees
who do not have a regular checking or savings
account at a financial institution because they
can access their wages conveniently. Also, if
there is no charge for using the ATM, they avoid
fees charged for cashing checks. The advantage to
the employer is low cost of paying wages and
efficiency. The Federal Reserve Board has adopted
regulations affecting payroll cards that will
become effective July 1,2007. 71 Federal Register
1473 (Jan. 10, 2006) Other types of stored value
cards are not affected by the regulation and are
generally unregulated by the federal government.
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