WASHINGTON—A study indicates that more consumers are turning to prepaid cards as an alternative to checking accounts.
Both the number of prepaid cards in circulation and the amount of money consumers are loading onto them have skyrocketed in recent years, an indication of prepaid’s attractiveness as a means to manage daily finances, according to CardHub, which noted that all of the new prepaid issuers entering the market are quickly acquainting the general public with the relatively new financial instrument.
The surge in usage of prepaid cards over checking accounts might also be a contributor to the decline in overdraft revenue during the first quarter, as CUToday.info reported here
As of 2012, roughly 12 million Americans used a prepaid card at least once a month and collectively loaded $65 billion to them – double the amount loaded just three years prior. That figure is expected to rise by 420% to $337.8 billion by 2017, CardHub explained.
CardHub noted that in its 2015 Prepaid Card Report, prepaid card costs increased in 2014 by an average of 21% relative to the previous year, indicating that the market is normalizing to an environment in which checking accounts are no longer as attractive and prepaid cards thus have less competition.
Based on the study, the best prepaid cards to use as replacement checking accounts are Green Dot Gold Prepaid Visa, KAIKU Visa, American Express Serve, and Amex Bluebird.
CardHub pointed out the cost of a prepaid card can vary widely depending on the offer and how the card is used, since the average prepaid card charges nine different fees.
Other report findings:
- While there is at least one prepaid card that is free for each usage scenario, selecting the wrong card can cost a consumer as much as $500 per year.
- When prepaid cards were first introduced, they were renowned for charging numerous fees. However, the average prepaid card now only charges nine different fees, compared to 30 for the average checking account.
- Prepaid cards from large banks are up to 84% more affordable than those from smaller institutions.