Back in October 2017, I did a really crazy thing. I participated in the Money 20/20 Payments Race and it truly was an adventure I’ll never forget. The best part was being able to meet so many amazing people, and one of those people was a woman named Heidi who works for an agency that represents the Canadian Prepaid Providers Organization (CPPO).
She was nice enough to offer me a free night’s stay in her home when I was in Denver, and to say thank you, I said I would gladly interview an expert from CPPO to talk about prepaid cards. I mean honestly, I think I won all around because I haven’t done an episode about prepaid cards and I actually really wanted to learn more about them from none other than David Eason, the chair of CPPO.
Here are some of the things we talked about in the episode, and don’t forget to watch my entire Money 20/20 Payments Race vlog series!
What is CPPO?
CPPO stands for the Canadian Prepaid Providers Organization, which is a “not-for-profit organization and the collective voice of the open-loop prepaid payments industry in Canada. It is the only association solely focused on this growing industry and includes the major players in open-loop prepaid in Canada.”
Open-Loop vs. Closed-Loop
Having been blogging about personal finance for over 6 years, sometimes I feel like I’ve heard about it all, but apparently not! I had no idea that open-loop and closed-loop cards until recently. But don’t feel bad if you didn’t know what they were either. They are really terms that only people in the prepaid card industry use.
So, what do they mean? It’s very simple. An open-loop prepaid card is either a Visa, Mastercard or AMEX prepaid card. It’s “open-loop” because it’s technically open to use at almost any retailer, as long as that retailer accepts credit cards for payment. A closed-loop prepaid card is a retailer-specific prepaid card, like a Home Depot gift card or a Shoppers Drug Mart credit card. The reason being is that they are comparatively “closed” because you can only use that card at that specific retailer.
You Cannot Build Credit with a Prepaid Card
One reason why the prepaid industry is trying to educate people about prepaid cards, and have moved away from calling open-loop cards “prepaid credit cards” is because they have nothing to do with credit. Open-loop cards work a lot like credit cards, but they will do nothing to help you build up a good credit history or rating.