General purpose reloadable (GPR) prepaid cards, also called GPR prepaid accounts, are a versatile financial tool for consumers. They can be loaded via direct deposit or with cash, and used at ATMs to withdraw funds and at stores to make point-of-sale purchases, similar to debit cards tied to checking accounts. They can also be used to budget or control spending. This report presents findings from a nationally representative telephone survey of GPR prepaid cardholders—defined as adults who use these cards at least once a month. It examines their attitudes, knowledge, and perceptions, and compares responses based on whether cardholders have checking accounts. The report finds that many “unbanked” consumers, those without bank accounts, are using prepaid cards like checking accounts, underscoring the need for the Consumer Financial Protection Bureau (CFPB) to finalize rules it has proposed that would extend greater safeguards to prepaid card users.
Prepaid card use is becoming more common.
Prepaid card use jumped more than 50 percent between 2012 and 2014, driven primarily by increased adoption among consumers with bank accounts.
Unbanked prepaid cardholders use their prepaid cards more like traditional checking accounts and to manage their budgets.
The unbanked, half of whom make less than $25,000 a year, check their balances more regularly, reload more frequently, and register their cards more often than banked cardholders do.
Most prepaid card users do not want the option to overdraw their accounts.
Many cardholders use their cards to control their spending, in part by not having the ability to exceed their balances.
Most users don’t know whether their liability for fraudulent use is limited, funds are FDIC-insured, or cards have arbitration clauses.
Almost all cards include liability limitations and carry FDIC insurance, but a lack of knowledge of these provisions could hurt consumers. Mandatory arbitration requirements restrict how consumers can resolve a dispute.
Pew has filed comments with the CFPB in response to its proposed prepaid rule.
In the letter, we focus on the following: