Prepaid Card Use is Growing Rapidly. Is This a Good Thing?

Publication: FOX Business (USA)

Author: Peter Andrew


04/30/2012 - Do you suffer from vertigo (or, more correctly, acrophobia: a fear of heights)? If so, you should probably avoid creating a mental picture of a graph derived from Mercator Advisory Group's projections for prepaid card usage in the U.S. There's a real danger you could get a dizzy spell, and bump your head on the x-axis. Mercator reckons that $28.6 billion was loaded onto prepaid cards in 2009. It expects that figure to top $201.9 billion next year.

About 13 percent of U.S. households had a prepaid debit card last year, according to research published by Javelin Strategy & Research on April 11. So who lives in those households? Javelin says that this form of plastic is particularly popular among Generation Y and other youngsters, along with those who don't use traditional banking products (often because they don't have access to them).

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All of this sounds scary. However, there are some good prepaid debit cards out there. The golden rule, as with choosing traditional credit cards, is to carefully comparison-shop before you take on plastic.

Yet that (comparison shopping) is precisely what consumers don't do, or very rarely, according to yet another April report on prepaids, this time from the Pew Health Group's Financial Security Portfolio. Pew's research was based on a series of focus groups comprising prepaid users, which were conducted last November in Houston and Chicago. It found: "Few participants comparison shop for a prepaid debit card. Most picked whichever one was convenient or recommended to them." That could be an expensive mistake.

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Read the full IndexCreditCards.com article, Prepaid Card Use is Growing Rapidly. Is This a Good Thing?, on FOX Business' website.

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