Large banks considering prepaid debit cards

It has been a few months since new card fees, banking rules and overdraft regulations went into impact. Prepaid cards are potentially a new product that many big banks are considering. These cards would provide a new revenue stream for these big banks. Pre-paid cards are lauded as a fantastic financial option by trade groups. Customer groups, however, are warning that these cards can come with high fees. Article resource – Expensive alternatives to checking accounts becoming more popular by MoneyBlogNewz.

Growth in the pre-paid card market

There was a rise from 700,000 to 3.4 million in the number of active prepaid cards used between 2005 and 2009. The growth of the industry is expected to continue, according to the Wall Street Journal. There can be around 7 million users by 2014. These numbers don’t contain payroll cards, which are very comparable to pre-paid cards. There could be over 9 million in the prepaid card market in the U.S. combined.

The argument for prepaid cards

Most prepaid debit cards do not come from banks. Non-bank businesses are responsible for them. These are offered by several locations. These consist of grocery stores, convenience stores and instant payday loans stores. Many big-box stores such as Walmart and Target offer branded prepaid cards. A customer with a prepaid card can be pay much less in fees than a traditional financial institution account holder according to a report done by Bretton Woods Inc., which Network Branded Prepaid Card Association employed as a consulting firm. When it comes to money management, prepaid cards are also good. Those with the cards can only spend what is already loaded on. Customers who do not have access to a traditional financial institution will even like the idea of pre-paid cards.

Reasons not to get a pre-paid card

Customer States publisher Consumers Unions did a report that states checking accounts are typically cheaper than pre-paid cards. Nine of the 12 cards studied were more expensive than the five comparative checking accounts. Dependent upon what is used, checking fees range per checking account. They’re generally between $0 and $438 a year. Between $18 and $606 is charged for pre-paid debit cards. That’s the average range. Most pro-prepaid studies just used overdraft fees as part of the checking. Only about 22 percent of consumers are willing to get overdraft protection though since the Dodd-Frank laws came out saying that it had to be something customers chose. Traditional checking accounts can be cheaper than prepaid cards. It may be a nice idea to get a prepaid card. Nevertheless, those doing this, need to watch out for fees that could be charged with them.

Articles cited

Consumer Reports

news.consumerreports.org/money/2011/04/debit-cards-banks-checking-acounts-fees-consumers-union-analysis.html?EXTKEY=AAOLWP05

Bretton Woods

bretton-woods.com/71501/index.html

Wall Street Journal

online.wsj.com/article/SB10001424052748704377004575651072113863694.html?mod=WSJ_PersonalFinance_PF4