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Reasons not to accept prepaid cards on your store

I am evaluating a prepaid card issuance project. This will be a VISA or MasterCard prepaid card. Among the things I need to estimate are the merchants this card will be able to work on.

The differences between prepaid, debit and credit cards are pretty obvious from the user’s point of view. As an user, there are pros and cons for each one. Now, from the merchant’s point of view: are there reasons to chose credit/debit over prepaid?

By accepting card payments, and not cash only, merchants expect either to sell more or to reach customers that wouldn’t be available otherwise (think e-commerces, where cash is usually not an option.) Would there be reasons to accept credit cards, but to prevent users from paying with prepaid cards?

I’ve found the following reasons to reject prepaid cards, but I wonder if there are more:

  1. To avoid granting free access to paid-membership-only privilleges,
  2. To prevent fraud or theft when renting expensive stuff,
  3. If you have a validation process to prevent fraud but it wouldn’t work out with this type of card
  4. In the U.S., restaurants have a tendency to charge the tip when the user has left the store. Given that this extra charge can be declined if the card has not enough balance, some restaurants don’t accept prepaid cards.

Are there any other differences? Do you know of certain transactions or operations that do not work with a prepaid card? Are there industries or merchant categories where accepting prepaid cards is a bad idea or unfeasible?

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