Prepaid cards growing in popularity
As banking fees rise, more Americans are turning to prepaid cards -- but how do you decide if it's right for you?
This post comes from Brian O'Connell at partner siteMainStreet.
But how do you choose the right one?
Increasingly, Americans are deciding that prepaid cards are a good idea. In fact, prepaid cards are one of the few banking services products that are on the rise. A brand new study out from Javelin Research shows prepaid card use was up 18% in 2011 from 2010, from 11% of the population to 13% on a year-to-year basis.
The upward spike in prepaid card use comes at a time when usage of checking accounts and debit cards -- products consumers equate with having high fees -- are edging downward.
Prepaid cards are especially popular with consumers who either don't have a bank account, or who have suffered some financial setbacks or who are looking to get their credit rating back on track. Banks know that consumers are tapping into prepaid cards, and are making them more attractive by adding social media functions and mobile phone apps for card users.
Today's prepaid features match and even surpass the features of many checking accounts, explains Beth Robertson, director of payments research at Javelin. "(That includes) functionality that can enable consumers to manage their account using their mobile device or social media account, establish and build a history that can be used for credit-issuing or enable person-to-person transfers provide high value to underserved consumers."
If you're angling for a prepaid card, what's your best move? American Express is out with a new guide on prepaid cards that lays out some options for potential customers. (Post continues below.)
The biggest obstacle might be high fees linked to prepaid cards. But as demand rises for the cards, Amex says that resulting competition among providers is keeping costs down.
"The prepaid reloadable card industry has historically been laden with hidden fees and confusing terms, but new competition is beginning to change that," notes Alpesh Chokshi, the president of global payment options at American Express.
Amex notes that competition has led to more "fee-lite" prepaid cards, so job No. 1 for consumers is to study the fine print and ask card providers for a list of possible fees on any prepaid card they sign on to.
Some other tips for consumers from the Amex prepaid card guide include:
- Make sure your card is "consumer friendly." Ask the provider about fraud protection, and ask for perks like roadside assistance and travel insurance. Card companies want your business, so chances are they'll go an extra mile to accommodate you -- but you have to ask.
- Find a card that suits you. You'll want to look for a card that is light on transaction fees, especially if you'll be using the prepaid card in place of a debit card -- that should translate into more transactions. Ask about any free ATM networks, as well.
- Ask about inactivity fees. Prepaid card providers may charge you if you don't use the card, so ask about any fees triggered by inactivity. Use your card just enough not to trigger those fees, and make sure to get cash back at the point of purchase, and not from an ATM. Chances are there's a fee for that, too.
More on MainStreet and MSN Money:
Copyright © 2013 Microsoft. All rights reserved.
ABOUT SMART SPENDING
Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.
Having worked as a writer, reporter and editor for more than 25 years, Editor Julie Tilsner is the sort of person who can't help but correct grammar in Facebook postings and on billboards. She's written for BusinessWeek, the Los Angeles Times, Parenting, Redbook, AOL and others. She lives in Los Angeles County with her family and loves to drink wine and practice yoga, although not generally at the same time.
A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.
Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
Marilyn Lewis is an award-winning writer with a passion for getting readers clear, straight information that helps them stay out of financial trouble. A former reporter for The San Jose Mercury News, she works from her home in Port Townsend, Wash. Contact her at MarilynLewis@Outlook.com.
LATEST BLOG POSTS
Those shackled with student loan debt are increasingly being targeted by scams and shady companies promising relief.