WASHINGTON—The Pew Charitable Trusts released a report today that finds the use of general purpose reloadable (GPR) prepaid cards on the rise among consumers. In particular, prepaid cardholders who are known as “unbanked,” because they don’t have traditional bank accounts, use their cards like checking accounts. This fact is a key reason the Consumer Financial Protection Bureau should bring more safety and transparency to this market by adopting its pending proposal on prepaid cards.
GPR prepaid cards, also called GPR prepaid accounts, allow consumers to load funds via direct deposit or with cash and can then be used to withdraw funds from ATMs or to make purchases at retail outlets. Today, about 23 million adults use prepaid cards regularly.
The report, called “Banking on Prepaid” and based on a nationally representative telephone survey of adults who use GPR prepaid cards at least once a month, examined consumers’ knowledge, attitudes, and perceptions based on whether they have a checking account.
“Our data show that the unbanked use their prepaid cards like checking accounts, reloading them more frequently and registering them more often. In contrast, people with bank accounts use the cards more like an ancillary financial product in that they load funds on a card, spend it down, and then buy another one,” said Susan Weinstock, director of Pew’s consumer banking project. “When a prepaid card is someone’s only transaction account, it is especially important to ensure that the card is safe and comes with uniform protections against theft, loss, and deception.”
The report’s key findings include:
Currently, GPR prepaid cards are not required to have the same level of protection as traditional bank accounts, such as FDIC insurance, liability coverage for unauthorized transactions, and restrictions on overdrafts. The CFPB released proposed rules in December 2014 that would enhance consumer protections for prepaid accounts. Pew’s report urges the CFPB to finalize these rules quickly.
Pew commissioned the Media, Pennsylvania-based firm Social Sciences Research Solutions to field the survey from Oct. 15 to Dec. 10, 2014. A total of 8,641 respondents were screened in order to reach 587 respondents who use a prepaid card at least once a month.
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The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Learn more at www.pewtrusts.org.