In today’s technology-driven world, consumers have more choices than ever when it comes to handling financial transactions. For one, prepaid debit cards have soared in popularity, and more options are becoming available all the time. According to a report from Pew Charitable Trusts, the majority of prepaid debit card users have used traditional banking products in the past, and some even use prepaid cards to augment their current checking accounts. It may seem counterintuitive to have an open checking account and a prepaid debit card, but many people who do insist that doing so helps them take greater control of their spending while also helping to avoid overdraft fees.
It’s estimated that roughly 40 million Americans are “unbanked” – a term used to describe anyone who does not have an open savings or checking account at a traditional bank. Although reasons for being unbanked can vary, many individuals actually prefer to be unbanked and rely on prepaid cards instead. There are a lot of practical uses for prepaid cards, and we’ll explore some of the most popular uses here.
Prepaid debit cards once had a reputation for being a costly way to complete everyday purchases, but that reputation has begun to change in recent years. For instance, WalletHub conducted a study examining 40 of the most popular prepaid cards. They found that every card user had at least one free card issuance option, and that prepaid cards issued by big banks were 82 percent less expensive than cards issued by smaller ones. Perhaps the most surprising revelation revealed by the WalletHub analysis was that prepaid cards charge fewer fees overall than a traditional checking account.
Even prepaid cards that have fees are still relatively low in comparison to overdraft fees. Common prepaid fees include activation fees, monthly maintenance fees (which are often waived with a qualifying deposit threshold), and ATM withdrawal fees. The easiest way to save even more is to get cash back when purchasing at a point of sale rather than pay fees for ATM withdrawals. When prepaid card fees are compared to overdraft fees, which can turn a small purchase into a huge charge, it’s no wonder millions prefer using prepaid debit cards instead.
Consumers clearly prefer using prepaid debit cards and consider them an affordable way to handle their funds. Mercator Advisory Group reported that in 2003 the amount loaded on to prepaid cards was less than $1 billion. By 2012, the amount neared $65 billion.
Ease of Use
Consumers love to use prepaid debit cards because they’re simple to use. Adding cash is easy—prepaid cards can be loaded at numerous locations throughout the country. Since there are so many retailers that allow cardholders to reload, this is infinitely easier than using a traditional bank because retailers outnumber the amount of bank branches, especially in lower income areas where traditional bank branches are scarce.
Prepaid cards are also much safer than carrying cash and offer virtually guaranteed approval at the point of sale, provided the transaction amount does not exceed the amount of funds loaded onto the card. For individuals who need direct deposit of their paychecks or benefits, most prepaid cards offer this option and provide a dedicated routing and account number specifically for electronic funds transfer (EFT) transactions.
In terms of budgeting and paying bills, prepaid cards are one of the easiest ways to accomplish these tasks. Since prepaid cards bearing major credit card logos can be used virtually anywhere that accepts debit and credit cards, consumers can use prepaid cards to pay bills online or via phone. Additionally, prepaid cards make it very easy to transfer funds between individuals, particularly if they own the same type of prepaid debit card. All in all, prepaid cards are virtually indistinguishable from a debit card tied to a checking account.
Prepaid debit cards offer a wide range of benefits that most consumers find extremely valuable. From helping with budgeting to offering a better way to receive wages or benefits, prepaid cards are an excellent alternative to bank debit cards or traditional credit cards.
Consumers are encouraged to comparison shop when it comes to prepaid cards. Additionally, it’s best to research the associated fees and compare the various features to ensure the best card is chosen. As with any financial product, it’s imperative to read the fine print to ensure the card suits your specific needs.
We just sent you an email. Please click the link in the email to confirm your subscription!
OKSubscriptions powered by Strikingly