Companion Card for Debit Programs
Payments

A Companion Card for Debit Programs

By: Courtney Haan, Strategic Product Manager

While prepaid reloadable debit cards are not new in the industry, financial institutions are starting to look at them with a renewed interest, partially thanks to fintechs reframing the product as a reloadable debit account, with no mention of the word “prepaid.” The latest strategy recommended by industry experts is to use these cards as a companion card alongside other debit card programs.

A prominent 89% of reloadable debit cardholders in the U.S. also have a checking account, according to a survey by Aite-Novarica Group. With so many cardholders using both products, it makes sense to connect reloadable and debit card programs. Similarly, a Visa study showed that 90% of general purchase reloadable (GPR) cardholders also have a checking account, 89% also have a debit card and 81% also have a credit card. These numbers show that members are willing to have multiple cards in their own wallets, making reloadable debit cards a sensible complement to a credit union’s debit program.

Pairing debit and prepaid reloadable debit cards can be beneficial to both credit unions and their members.

Easily add funds via a connected DDA

Since reloadable debit cards can be linked to a demand deposit account (DDA), it’s easy to load funds directly from the account. Connecting a reloadable debit card to a checking account encourages members to keep more deposits in their accounts, earning the member more interest on the deposits. Members are then able to transfer those funds to the reloadable debit account whenever needed. Funds can also be loaded via debit card transactions, which earns interchange revenue for the debit program.

Reloadable debit cards are safer

Since the start of the pandemic and the acceleration of e-commerce, we have seen a spike in card not present (CNP) transactions. Many consumers have turned to reloadable debit cards to pay by card without the risk of exposing their entire DDA during CNP transactions. A recent Mercator Advisory Group study showed that 38% of consumers are using reloadable debit cards more since the pandemic began, compared to 29% for debit cards.

Use as budgeting and educational tools

Reloadable debit cards can be a useful budgeting tool for members looking to manage their spending. Since reloadable debit cards can only be used for the amount loaded onto them, members cannot overdraw the account, avoiding NSF and overdraft fees. Members can use the card to set aside funds for special budgeting needs or to help educate their dependents on financial wellness and budgeting. Some credit unions even include reloadable debit cards in their youth product offering because of the monitoring capabilities that can be used as parental controls.

Direct deposit and early access standard

Reloadable debit cards can also be funded via direct deposit, seamlessly connecting to an employer account or government benefits provider. In some cases, that also includes two-day early access to the funds as a standard offering. With direct deposit, cardholders can direct a portion of their pay to their debit account and a portion to the reloadable debit account.

Given these benefits, we are seeing an increasing number of financial institutions offering a prepaid companion debit card at no additional cost to members when opening a checking account. This strategy aligns with the credit union commitment to helping members manage their financial health. Adding prepaid reloadable debit cards to your credit union’s portfolio can offer financial benefits for your members and your credit union.

Courtney Haan leads the Prepaid Product Management team at PSCU, driving innovation and marketing strategy for PSCU’s Prepaid portfolio of products. Prior to joining PSCU, she held several global senior product and brand management positions in classic consumer products companies. Courtney is a graduate of Colby College with a degree in Business Administration and French, and also holds a Masters of Business Administration degree from the F. W. Olin Graduate School of Business at Babson College, with a concentration in International Marketing.