WASHINGTON—Most unbanked consumers use prepaid cards rather than use checking accounts that will be hit with overdraft fees, a new study reveals.
A report from The Pew Charitable Trusts on prepaid, introduced as the CFPB plans to soon adopt a final rule on prepaid cards, shows that 72% of the unbanked and 45% of those with bank accounts say they use prepaid cards to avoid overdraft fees.
The study, Banking On Prepaid, also reveals that 86% of unbanked card users and 81% of those with bank accounts would rather have a transaction declined than pay a $35 overdraft fee.
Other key findings:
- 57% of unbanked and 46% of those with bank accounts say they use prepaid cards to avoid check-cashing fees
- 67% of unbanked and 50% of banked prepaid card users say they use the card to avoid getting into debt by not having the ability to exceed their balance
- Prepaid card use jumped more than 50% between 2012 and 2014, driven primarily by increased adoption among consumers with bank accounts
- Approximately 23 million U.S. adults are regularly using prepaid cards
- 38% of unbanked and 29% of banked card users compared terms
- The unbanked, half of whom make less than $25,000 a year, check their balances more regularly, reload more frequently, and register their cards more often than banked cardholders do