Increasingly lower fees make prepaid cards almost as affordable as checking accounts, a new report says.
Fees on prepaid cards are falling, making using the cards nearly as affordable as opening a checking account, a recent study from Consumer Reports shows.
Today’s prepaid cardholders, who are growing in ranks, pay roughly between $3 and $14.95 in activation fees, about 66% less than the $10 to $39.95 range consumers paid in 2009.
Of the 16 cards included in the study, 13 have monthly fees, but some of the card companies will waive those fees if consumers make a monthly direct deposit, similar to the way banks and credit unions may run their checking accounts. And many issuers are dropping overdraft fees.
Credit unions that offer these products can ensure their rates remain competitive and promote these cards to members as a way they can tap the convenience of credit cards without going into debt. Of course, credit unions can also continue to offer and promote their more affordable checking accounts and card products, which typically have lower fees than banks.
Prepaid cards are increasingly popular, as last year prepaid card use rose by 18%. About 13% of U.S. adults had prepaid credit cards last year, up from 11% in 2010, according to a study by Javelin Strategy & Research, a research firm based in Pleasanton, CA. And many of those card holders are Gen Y and the underbanked, who are trying to build a credit history.
The same study from Javelin Research showed that credit card and debit card users are declining. The number of consumers with credit cards dropped to 67% from 74% and the number of debit card users dropped to 66% from 78%.
“Today’s prepaid features match and even surpass the features of many checking accounts,” says Beth Robertson, director of payments research at Javelin, in a press release. “Functionality that can enable consumers to manage their account using their mobile device or social media account, establish and build a history that can be used for credit-issuing.”