Prepaid Debit Card Reviews, Complaints, Etc

Tag: prepaid cardholders

  • Study: Consumer Debit Card Use Declines As Prepaid Grows

    Study: Consumer Debit Card Use Declines As Prepaid Grows

    Consumer debit card use is on the wane in the United States. Increasingly taking the place of the old standby of debit cards is a mixture of alternatives, such as reloadable prepaid cards, check cashing services, short-term loans and even rent-to-own arrangements.

    Those are some of the highlights of a new report issued by the Mercator Advisory Group. Titled, “Consumers and Debit 2013: A Shift to Alternative Payments,” the study is the result of a survey of over 3,000 U.S. consumers conducted last year. In total, the report found that consumer debit card use declines have been substantial over a relatively short period of time. In 2011, so-called debit card penetration in the U.S. was at 68 percent. By 2013 that number had decreased to 59 percent.

    Instead of debit card usage, Mercator’s researchers found that consumers are relying on what have often been considered fringe financial services. For instance, largely forsaking the services provided by banks and credit unions, half of consumers surveyed said they were using check cashing, bill payment, money transfers, short-term loans and rent-to-own arrangements to take care of their financial needs. Furthermore, the report found that fully three-quarters of people surveyed who initiate money transfers do so not from banks but from supermarkets and discount and convenience stores.

    The demographics of debit card users are also in the midst of a transformation. Young adults, for example, have gone from being more likely than average to use debit cards to less likely. In addition, the report found that debit card usage in households earning less than $75,000 is also decreasing, replaced instead by alternatives like prepaid cards.

    Besides chronicling the decline in debit card usage, the Mercator report also offers up an explanation about what is driving it. In short, the authors of the report declare that the Durbin Amendment to the 2010 Dodd-Frank financial reform law is the culprit. Because of lost revenue resulting from changes in the law, banks have begun to charge debit account fees as a way to compensate. But those fees have motivated many consumers to seek out low or no-fee alternatives.

     

     

  • Pew: Best Prepaid Cards More Affordable Than Checking Accounts

    Pew: Best Prepaid Cards More Affordable Than Checking Accounts

    It’s a classic good news, bad news scenario. According to research issued last week by the Pew Charitable Trusts, the best prepaid cards available on the market are often a more affordable option than basic checking accounts. Still, while prepaid cardholders are generally in a far better position than they were when Pew’s last survey of prepaid cards was released two years ago, the organization’s researchers have no lack of recommendations about how various rules and regulations could improve things for consumers.

    The report, titled “Consumers Continue to Load Up on Prepaid Cards,” examined the disclosures and fee structures of 66 prepaid cards. In general, Pew found that as the market for prepaid cards has expanded – U.S. consumers loaded $64 billion onto prepaid debit cards in 2012, more than double the amount loaded in 2009 – it has also matured in a way that is beneficial to consumers. “More consumers are turning to prepaid cards as a convenient tool to control spending and fees,” says Susan Weinstock, who directs Pew’s safe checking research.

    In large part, that improvement is due to the fact that prepaid cardholders are now an attractive market for large financial institutions. Indeed, the 10 largest prepaid cards are now offered by banks compared to zero in 2012. As a result, the report finds the best prepaid cards are now often lower cost than checking accounts offered by large financial institutions.

    Other improvements for prepaid cardholders noted by the study’s authors include much better disclosure. For instance, nearly all of the cardholder agreements examined by Pew included language explicitly stating that customer funds would be covered by Federal Deposit Insurance Corporation (FDIC) insurance. Even when FDIC insurance was not included, some cardholder agreements explicitly said so. Another move in the right direction, according to Pew, is that prepaid cardholder agreements now increasingly include arbitration agreements that allow customers to settle disputes with prepaid card issuers via a private third party decision maker.

    But not everything is rosy for prepaid cardholders. Among the report’s other findings is that prepaid cards do not offer consumers the same limited liability projection that federal law mandates for checking accounts. Pew also has a laundry list of recommendations to improve prepaid cards, including the elimination of overdraft protection, protection from liability for unauthorized charges and federal insurance for fund losses due to the failure of a financial institution.

    “While prepaid cards offer many benefits to consumers, they are a relatively new product with little oversight,” says Weinstock. “A lack of protections undermines prepaid cards as a safe and easy way to manage money.”

     

     

     

Prepaid Debit Card Reviews, Complaints, Etc