Reloadable Prepaid Card Use on the Rise
A new study shows a significant increase in the use of prepaid cards among both banked and unbanked Americans.
According to the Pew Charitable Trusts research entitled “Banking on Prepaid”, use of these general purpose reloadable (GPR) cards has increased over 50% between 2012 and 2014. Most of this growth is coming from an increased number of “banked” Americans using prepaid cards for their finances, rather than the growth in unbanked consumers.
The research also found that unbanked Americans with prepaid cards are using their prepaid cards just like a checking account. These consumers are checking their balances more often, reloading their cards regularly, and registering their cards more than cardholders with bank accounts.
Nearly half of the unbanked population makes less than $25,000 a year, and many of them use prepaid cards to manage their budgets.
Most prepaid cardholders, whether they be banked or unbanked, say they are using the cards to help them monitor their spending. Overdrafting a checking account or credit card can be costly, so these prepaid cards offer a safeguard against spending more money than you have in your account.
“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,” Susan Weinstock, director of Pew’s consumer banking project, said in a statement.
Following the report, Pew released a letter to the CFPB urging the Bureau to take a stronger stand in the prepaid card industry.
“Credit on prepaid accounts should be regulated like credit cards and not like bank overdrafts. Thus, any credit that is accessed automatically through the use of the prepaid account should be covered by these rules.”