PayPal launches pre-paid cards to help cash lovers buy online

PayPal (s ebay) wants to encourage the cash-is-king set and the underbanked to buy more stuff online. So it’s introducing PayPal My Cash Card, a pre-paid card that allows people to make PayPal web purchases without having to use a credit, debit or banking account.

Users can buy the new cards at 30,000 U.S. retail locations including CVS, Rite Aid, Fred’s Super Dollar and Dollar General Stores. They can buy card with fixed amounts of $50 and $100 or load any amount they want from $20 to $500 at a time. Then they just go to the My Cash Card website and move the funds into a new or existing PayPal account. PayPal charges a one-time activation fee of $3.95.

PayPal, cash cardThis gives people who prefer to pay with cash another way to make ecommerce purchases. They can just use their PayPal account when checking out and the money will get taken from their account. This also gives PayPal’s existing 117 million users another way to fund their account.

It’s a smart move by PayPal because it can get more people to put more money directly into PayPal accounts and pay from those accounts, which is cheaper for PayPal than paying for purchases through a credit and debit card on file. It also shows that more companies are seeing the opportunity in tackling the pre-paid and underbanked market. There are about 25 percent of consumers who don’t use credit and debit cards right now.

Walmart in April offered users the opportunity to make in-store cash payments for online goods.  PayNearMe (see disclosure below), another service for the underbanked, lets people pay for things online by using cash at a 7-Eleven. PayPal is working with pre-paid card provider InComm to offer the new cash cards and is looking to offer the cards in 60,000 locations by next year.

Disclosure: PayNearMe is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.