Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

Which of the following best describes the purpose of a prepaid card?

1. To provide credit for purchases

2. To hold funds for specific purposes

3. To link to a savings account

4. To offer unlimited spending options

The correct answer is: To hold funds for specific purposes

The purpose of a prepaid card is primarily to hold funds for specific purposes. These cards are preloaded with a certain amount of money, which allows the cardholder to spend only the amount that has been deposited onto the card. This feature helps individuals manage their spending and budget effectively since once the balance runs out, they cannot spend more unless they recharge the card. In contrast, options that involve providing credit for purchases imply borrowing money, which is not the case for prepaid cards as they do not extend credit. Linking to a savings account pertains to banking products rather than prepaid cards, which operate independently from traditional banking accounts. Unlimited spending options do not apply to prepaid cards because spending is limited to the preloaded amount, ensuring that users cannot exceed their available balance. Thus, option B accurately captures the essential function of a prepaid card.