Interest in Prepaid cards growing Consumers like convenience; advocates warn of hidden costs
Posted May 04, 2012 in Press Releases
About 1.3 million households in Ohio use few or no traditional banking services, and members of this group are increasingly relying on prepaid debit cards to meet their financial needs, according to studies.
Prepaid cards allow consumers to pay bills online, engage in e-commerce, limit their spending and protect against theft of personal information without needing a bank account. The cards are also popular among young people.
But consumer advocates warn that prepaid cards often carry large fees for basic tasks such as card activation, balance inquiries and cash withdrawals. Advocates encourage people to research any cards before purchase to weigh their advantages against their downsides.
“This is a tool that can be very beneficial for working families in Ohio that have had issues in the banking sector or want a complement to a savings account,” said David Rothstein, project director for asset building with Policy Matters Ohio. “But we just have to make sure that we have a sufficient network so that people can use the cards without it being a money-losing venture for them.”
‘Secure and Convenient’
Prepaid cards are marketed as a “secure and convenient” payment method that allow consumers to shop online, pay bills over the phone or electronically and receive direct deposit without the hassle of maintaining a checking account.
The cards, which often can be reloaded with funds, are sold at retail stores, such as Walmart and CVS, and also at banks and online. Most businesses accept the payments, and consumers can also use them to withdraw cash.
The cards have been around for years, but interest in them is growing.
In 2011, about 13 percent of U.S. consumers used prepaid cards, up from 11 percent the previous year, according to a study by California-based Javelin Strategy & Research.
Prepaid card use grew last year even though ownership of other more traditional financial products