Consumers have made a conscious decision to cut down on using the credit card, and have opted for reloadable prepaid debit cards instead. These reloadable prepaid debit cards have gained prominence in the financial service industry during the recent times, and it is one of the fastest growing segments. These cards are expected to grow to four times their volume, and expected to go beyond $440 billion by 2017 as per the volumes project by the independent research that has been commissioned by MasterCard. Almost one-third of the customers hold some sort of prepaid card as per the 2009 survey conducted by the Federal Reserve Bank, Boston.
This product has been embraced even by the Federal Government. The Treasury has announced last week that it would provide prepaid debit cards to 600,000 taxpayers in the low-income group that they could use to get their tax refunds deposited directly.
However, there have been concerns by the consumers as well as lawmakers as these prepaid cards do not have adequate protections that come with traditional banking as well as credit union accounts. These prepaid cards also have a number of fees that literally eat into the customer’s balance.
These concerns have resulted in calls for better protection on prepaid cards. Last year the Federal Reserve Governor, Elizabeth Duke, had in her speech mentioned that financial regulators need to monitor these prepaid cards, and see if the customers were adequately protected.
Issuers of prepaid cards have stated that these are fewer expensive cards, and are pretty safe compared to check-cashing stores, pawn shops, or other businesses that are used by over 17 million Americans, who have no bank accounts.
The good news, however, is that the cost of prepaid cards has come down due to the stiff competition, as per Tim Murphy, MasterCard.
Wal-Mart had reduced its activation fee in 2009 on its MoneyCard from $8.94 to $3. The reloading and maintenance fees were also driven down to $3 each. Wal-Mart’s MoneyCard seemed reasonable when compared to the basic checking account or the check-cashing store, states Murphy.
Apart from the activation fees, and the monthly charges, prepaid cards also charge customers on other services as well, such as ATM withdrawals, balance enquiries, monthly statements on paper, and even calls made to the customer service personnel. Even closing the account attracts an additional fee. These cards are a good option if they are managed properly.