WASHINGTON—More consumers are using prepaid cards to replace traditional banking services, such as checking, and Mercator Advisory Group projects that $343 billion will be loaded to prepaid by 2018.
But a new study reveals that consumers should choose prepaid cards wisely when doing so, as the wrong choices can lead to annual fees of more than $300.
“Each type of prepaid card user has at least one free option available, and finding it is crucial considering the wrong card can cost consumers up to $311 per year,” stated CardHub in its 2016 Prepaid Card Report.
CardHub noted that consumers are increasingly turning away from traditional checking accounts in favor of prepaid cards.
“Both the number of prepaid cards in circulation and the amount of money loaded to them by consumers have skyrocketed in recent years, as new issuers have entered the market and the general public has grown acquainted with this relatively new financial instrument. As of 2012, roughly 12 million Americans used a prepaid card at least once a month and we collectively loaded $65 billion to our accounts – double the amount loaded just three years prior,” the company stated.
Other highlights from the report, which can be found here, include:
- Up to 48% of prepaid cards may not be suitable for common consumer needs, due to a lack of necessary features.
- Prepaid cards from large banks are up to 82% less expensive than their small-bank counterparts.
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CardHub’s 2016 best prepaid cards for the most common use cases are:
- Best Replacement Checking Account: American Express Serve
- Best for a Child's Allowance & Accessing Electronic Transactions: Bluebird Prepaid Card
- Best Check-Cashing Alternative: Emerald Prepaid Cards.