Prepaid is increasingly the way to go for many consumers today. General purpose reloadable (GPR) prepaid cards are growing in popularity because they are increasingly accessible and in many cases more economical than basic checking accounts, according to a new report by the Pew Charitable Trusts.
GPR prepaid cards are a relatively new consumer financial product that can be used to get cash at ATMs and to shop online and in stores. Five percent of adults or about 12 million people now use prepaid cards at least once a month. In 2012 consumers in the U.S. loaded more than $64 billion onto the cards, more than double the amount loaded in 2009.
Prepaid cards a better deal
The study found that the growing use of GPR prepaid cards is positive for consumers. When comparing the cost of prepaid cards and checking accounts offered at the same large financial institutions, prepaid cards are often a better deal, the study concluded.
The primary motivation cited for using prepaid cards was gaining control over finances. “More consumers are turning to prepaid cards as a convenient tool to control spending and fees,” said Susan Weinstock, who directs Pew’s safe checking research.
Since 42 percent of card users in the study had no emergency savings, the primary reasons for preferring prepaid cards were to purchase online, as well as to avoid credit card debt, spending beyond their means and overdrafts.
Savings features desired
Prepaid cards have proven so helpful to the ability to control finances that two out of three card users in the study expressed interest in features that would make it easier for them to save money. Many of the survey respondents opposed adding features that would allow them to overspend what is on the card, such as credit or overdraft capabilities.
The study notes that although prepaid cards offer many benefits to consumers, protections lag far behind other banking products, including no federal laws or regulations to protect consumers from hidden fees, unauthorized transactions, or loss of funds.
The fee structures of many cards are also changing, with more charging monthly fees but not other transaction-based fees, such as point-of-sale or customer service fees. This fee structure is coming more in line with traditional checking accounts.