Americans Are More in Love With Prepaid Cards

Money Talks News

American consumers have grown increasingly fond of reloadable prepaid cards, putting about $65 billion of their money on them in 2012 — double the amount loaded in 2009. And the cards are much more user friendly and have fewer fees than when they arrived on the scene several years ago, says a new report from The Pew Charitable Trusts.

Pew wrote:

The increasing popularity of the cards is good news for consumers who want an alternative to traditional checking or credit accounts — particularly because these cards have become more affordable over the past year and, in many cases, offer lower and fewer fees than basic checking accounts.

About 12 million Americans use a prepaid card at least once a month, Pew says. The average household income of a prepaid card user is $30,000 a year.

Many of them have had or still have checking accounts and credit cards, and 2 in 5 who’ve had a checking account said they closed or lost the account because of overdraft fees.

To many users, a prepaid card is a tool to keep them from overspending.

The report said:

Most customers’ primary motivation for using prepaid cards is to gain control over their finances. The top four specific reasons they use the cards are to:

  • Buy things online.
  • Avoid credit card debt.
  • Avoid spending more money than they have.
  • Avoid overdrafts.

But these cards have some drawbacks, and people need to be aware of them. Pew says:

  • They don’t come with the limited liability protection that you’d get with a checking account.
  • Not all cards provide Federal Deposit Insurance Corp. protection for your funds in case the issuer goes belly up.
  • “Arbitration agreements, which require a customer to settle any dispute using a private, third-party decision maker, are increasingly included in prepaid cardholder agreements,” the report says.

Have you used a reloadable prepaid card? Tell us why in the comments below or on our Facebook page.

This article was originally published on MoneyTalksNews.com as 'Americans Are More in Love With Prepaid Cards'.

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