The popularity of prepaid cards is growing steadily around the globe, with a number of recent surveys particularly highlighting the burgeoning sector.
Bankrate’s 2014 Prepaid Debit Cards Survey has shown that the industry is gradually moving towards lower fees and more transparency – factors that are driving the product towards the mainstream.
Offerings on cards still vary widely, meaning it is important to consider all available options, but an ‘evolution’ in the market place has changed the way these types of card are viewed.
An evolution in the American marketplace
“The evolution of the market place over the past couple of years gas not only brought fees down, but also made them more transparent,” said Bankrate’s chief financial analyst, Greg McBride.
It would now appear that consumers in America are viewing prepaid options as an alternative to more traditional credit and debit methods.
According to a 2013 report from the Federal Reserve, prepaid card payments increased faster than credit, debit and cheque payments between 2009 and 2013.
This is partly due to increased demand, while companies have also increased their prepaid card offerings to attract all kinds of new custom.
Dramatic increases in prepaid spending
Customers in America loaded $71.6 billion (c. £42.8bn) onto reloadable prepaid cards in 2013, up from $56.8bn (c. £33.9bn) two years earlier, according to research firm Mercator.
The firm also predicts that the figure will reach $97.9bn (c. £58.5bn) by 2016, suggesting that more than $100bn could be loaded onto cards in America alone in just a few years.
A senior analyst with the group suggested that the product has leapt from being a fringe product to one on the mainstream.
The survey did find that many of the cards in use in the United States carry various fees and other charges, but reported that these fees were dependent on the cards concerned.
This tremendous level of variation has created a highly competitive market, where consumers are hunting for a financial product that can meet their individual needs.
Fees will often depend on a card’s target audience, with cards available for gifting, online shopping, travelling and even for college students.
Why people choose prepaid card options
Prepaid cards carry a large amount of advantages, providing a viable alternative for customers not wishing, or unable, to get credit or debit cards.
Unlike credit and debit cards, prepaid cards are not directly linked to a bank account, making fraudulent activity a lot more difficult.
For those with concerns over their funds, transferring some to a prepaid card can also help to control spending, as only the sums on the card can be spent.
However, the cards can be topped up if necessary and can be replaced if they are lost or stolen without funds being affected.