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Prepaid Cards Latest Must Have Financial Product


Prepaid Cards

Whether it’s the growing fee structures of traditional bank accounts and credit cards, the inability of some consumers to secure their own checking account or just a desire to really simplify their finances, consumers are sending the prepaid market into the stratosphere. Sometimes referred to as “alternative financial services”, this category is expanding faster than any other and it’s due to the popularity of prepaid cards and other similar products.

New Choices

MSN chalks up this new love affair between prepaid products and American consumers to a growing distrust in the nation’s financial entities. As a result, those in the business of ensuring consumers have options are wasting no time. There are a host of new options available and it’s expected we will continue to be wooed with those willing to help us step off the invasive financial grid.

That’s not to say traditional credit card providers won’t continue their aggressive efforts. Especially if consumers are turning to these prepaid debit cards because of credit problems, there will be those who will closely monitor their own personal finances with the hopes of re-entering those avenues that are more traditional and perhaps more affordable. Adding to that will be the growing number of perks and benefits from banks and credit card companies in the new year and beyond.

Economic Drivers

Remember, there’s much more at stake than simply a competition for your business. The entire American economy relies on satisfied consumers and let’s face it – the prepaid products are fine, but it’s the credit card APR, bank fees and strong relationships between consumers and their banks that drive the economy. Businesses also rely on those familiar products to remain viable. They won’t hire unless they’re confident and without access to credit, it’s simply not going to happen. Financing is what turns this country’s economy.

In many ways though, it feels more like a standoff. Banks have requirements that consumers must meet to be creditworthy. Consumers, after years of tough economic times, have taken a beating when it comes to their credit scores. Something has to give if they’re wanting anything but time to play a role in when these relationships begin to happen. Will banks and credit card companies lower their approval requirements? Not if the prepaid market has anything to say about it.

Happy Consumers, Strong Economy

There’s no denying the trends in prepaid products. Consumers are flocking to them and if they begin offering many of the same perks and benefits as traditional credit cards, then it appears a formidable opponent is in the making. Ah – but then again, it could be those heavy hitters in the credit sector are competing against…themselves.

Every credit card issuer has its own prepaid product now and in recent months, we’ve seen the big banks introduce their own prepaid cards. They’re not missing out on this exploding new avenue. As we know, the underbanked and unbanked population has grown significantly in recent years; it’s due mostly to a lack of traditional banking options.

It comes as little surprise then that unbanked households are the drivers in the prepaid card growth. This is actually beneficial for the banks and credit card issuers. They are able to watch for trends and as a result, they can fine tune their offers that will allow them to woo these same consumers through the back door – even if those same consumers were rejected as they attempted to walk through the front door.

Improving Fee Structures

The results of a recent Pew Charitable Trusts analyzed more than 50 different prepaid cards with the goal of gauging the average fees in the industry, as well as how fast consumers are adopting these new products. Not surprising, many prepaid cards have far lower monthly and annual fees than debit and credit accounts. Those included lower out of network ATM fees, no overdraft penalties and on average, half the annual costs of traditional checking accounts.

The study revealed that consumers prefer prepaid cards because they make it easier to budget and eliminate the danger of overdrawing an account. Perhaps most interesting, though, is the privacy consumers cited. The survey noted that the anonymity of prepaid cards is an especially beneficial perk for consumers, as many choose to use the cards in situations where they do not want to disclose personal banking information with an organization, such as utilities companies. Consumers view prepaid cards as a method of keeping their data secure.

Even better? Consumers are finding more options everyday, leading to fierce competition in the industry. Here are two of the newest offers of American Express. Both are indicative of a card network wanting to draw in new customers – and the credit card giant is offering something others are not: the opportunity to “graduate” to a traditional American Express card after consumers establish strong financial habits.

American Express PASS

The PASS Card from American Express is designed for teens and young adults. It’s a powerful tool that parents are turning to for its many benefits. From the aesthetic of the card itself, which is something teens are drawn to, to the many ways of loading cash onto the card, this is a great choice. Parents and teens (or grandparents, best friends, aunts, uncles) can easily reload cash via a number of ways, including bank transfers, wire transfers, MoneyPaks or through a host of retailers. Text alerts and online account management are part of the offering and let’s face it – if you’re the parent of a teen, you know all too well how challenging it is for them to keep up with their shoes – which is why the Amex Pass offers a host of protections, including lost or stolen card replacement and fraud protection. It’s accepted all over the world, too.

AMEX Prepaid Card

This, of course, is the classic prepaid card from American Express. For a limited time when you open your account with $200 or more, you’ll receive a complimentary $25 gift card. This is a great incentive. That, and along with the absence of application fees, maintenance fees or annual fees, this prepaid product is one many are opting for. It brings with it all of the benefits that make American Express the strong credit card company it is today, including around the clock customer service, exclusive discounts and offers, roadside assistance and global assist travel insurance. Entertainment Access is another program these card members are offered and you can open your Amex prepaid account with as little as $5. ATM fees are a comparative $2 per transaction.

Prepaid debit cards don’t require credit checks and you don’t have to go through a lengthy application process, either. Many of the newer offers, you’ll discover, have great benefits that weren’t available as recently as six months ago – it’s definitely advantageous for the consumer if these card companies are that competitive.

Bottom line, if it’s a prepaid product you’re in the market for, you owe it to yourself to review all of the offers before choosing. Oversight in this particular area isn’t as strong as it is for traditional credit cards – although that could soon change. Meanwhile, Mercator Advisory Group projects the industry will grow by 200 percent by the time 2013 comes to a close, increasing to $117 billion in transactions by next year.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express.

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