Prepaid debit cards continue to grow in popularity and even though they were developed, initially, for those considered unbanked or underbanked, today’s prepaid cards have evolved into impressive financial tools that are being used across the sector.
Want proof? All one needs to do is take a look at who’s offering prepaid products. JPMorgan Chase, American Express and other big banks all have their own offerings – and folks are flocking to them in droves. In fact, they’re not even being marketed to “just” un – or underbanked consumers; they’re taking the role of an additional tool in one’s arsenal of financial management. One prepaid card seems to be leading the way, too. “We think prepaid can be of value and use to all types of consumers,” says Kaiku Chief Executive Jon Round.
The number of new accounts like leaped up by 20% in 2011 and while the hard numbers aren’t out yet, it’s believed 2012 will be even more evident of the trend and 2013 could bring a market of $594 billion. A full one third of these prepaid product users are already earning more than $45,000 and here’s where it gets really surprising: more than one third have college degrees and earn more than $70,000 annually.
So why the surge – especially among those least expected to have chosen a prepaid card? One explanation being offered is the lower fee structures. A few years ago, consumers might have paid up to $10 in monthly fees. These days, many have fees of just two or three dollars – which is significantly less than traditional bank account monthly fees. In fact, many are opting for prepaid products instead of a traditional checking account. Even cautions that consumers will lose some of the conveniences of a checking account aren’t enough to sway them.
Does anyone even write checks anymore? I don’t think I’ve written a single check all year,
said one legal assistant in Chicago.
There are similar conveniences that aren’t sacrificed, either. Online bill pay, safety features that often mirror those in credit card accounts and direct deposit are just a few of those conveniences that transition into prepaid cards.
The monthly fees are definitely worth it, especially because many are lower than what banks can do. In fact, there’s a new trend that young adults aren’t even opening bank accounts and instead, are opting for prepaid cards.
Ah, but it just might mobile spending options that will eclipse all of the other reasons. A recent Javelin Strategy & Research study shows that more than $20 billion in sales took place on mobile devices last year, including both online and in-store shopping. A prepaid debit card keeps those shopper safer. It’s not linked to any other accounts, which limits what a thief, were he able to penetrate a network, could steal. Many consumers have prepaid cards that load with only what they need to pay bills, pay restaurant tabs and do their shopping – all via their smartphones.
Consumers are thriving in a mobile environment and retailers and service providers are only happy to oblige. The cherry on top of that sundae is the popularity of tablets – The report shows a significant increase in spending when those consumers use a tablet; in fact, those purchases are on average about $10 more than those using smartphones. Even better, the report outlines the reality of shopping and other financial transactions hitting – and even surpassing – $1 trillion over the next four years. The spending has been consistent, too, over the past couple of years which lends to the possibility of a $1 trillion trade. Already, in the third quarter of 2012, mobile phones accounted for close to $56 billion being traded via credit and debit cards as they relate to purchases and services.
Finally, there are the legalities associated with these products, or rather, the lack of. There’s still a big controversy over the Durbin Amendment, which was a last minute addition to the Dodd Frank Act. Banks and card companies are limited in how many fees they can charge for things like ATM withdrawals and even speaking to a live customer service rep. Banks have lost more than $8 billion in different fees over the past twenty four months. The re-election of President Obama ensures those restrictions stay in place, too.
And now, here we are, the week Thanksgiving that’s going to be followed by Black Friday and Cyber Monday – the money totals should tell the tale on how we’re spending our money, with which products and how much we’re trading.
So do you use a prepaid debit card? Will you be shopping with it Black Friday or Cyber Monday? If so, what was the initial attraction to the prepaid debit cards? Do you use it in conjunction with your smartphone or tablet? Let us know your spending habits.
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