I've used stored-value cards a lot for gift-giving and, believe it or not, I use them occasionally for budgeting. Yes, I actually do pop down to my local bank from time to time and put a bunch of money onto a card so that it is already saved and allocated for certain purposes. In fact, I would use stored-value cards a lot more for budgeting if it weren't for one inhibiting issue: frictional costs. Every time I buy a card, I pay a fee. And I hate that. Recently, my bank offered prepaid cards with no fees as a way of getting members to sample them. If Visa and MasterCard can figure out some way to not charge a fee, then growth would really fly. In fact, I always wanted to open up one of those reloadable consumer debit cards that I've seen credit-card companies promote in the past, but I was daunted (rightfully so, I might add) by the fee structures.

The other thing that companies must eliminate with prepaid cards is a nasty little bug that pops up with certain point-of-sale systems. From personal experience, I've found that you must know, at all times, the balance remaining on some prepaid cards when making a purchase. Otherwise, your card might be rejected. As an example, say the card has $10 remaining on it, and you're buying something for $20. It's possible the card might be rejected because the software thinks you are only using the card for the purchase and won't be splitting the tender. You don't find this issue with gift cards specific for a particular business (i.e., a Wal-Mart gift card will always be accepted, even if only a penny remains). I hate this, and so does everyone else.

So, the challenge for Visa and MasterCard is to grow consumer acceptance of prepaid cards. They can do this by eliminating fees and allowing all points-of-sale to be as smoothly accepting of prepaid cards as they are of store-issued gift cards. Granted, eliminating fees is a tall order, considering that the market for prepaid cards is still a small one. But as society moves toward a cashless system (I understand we'll never get there, but we'll always be moving toward it), and as more and more people become like me and want electronic budgeting tools separate from their checking accounts, prepaid cards should increase in their significance.

Disclosure: I own none of the companies mentioned; positions can change at any time.