Those who turn away from basic banking services are turning to a new form of payment method: prepaid debit cards. The trend, which began primarily with low-income credit and debit card users, is now spreading to the middle class. Middle class Americans, many with a household income in excess of $100,000, are turning to prepaid debit and credit cards for lower costs, no overdraft fees, and services that are quickly catching up in quality to traditional retail banking services.
The FDIC also reports that 24 million households are now “underbanked,” meaning that they have abank account but do not participate entirely within the construct of the normal banking system. The underbanked often use other services like check cashing companies and prepaid debit or credit cards to supplement a small portion of services they obtain from consumer banking companies. In 2011, some 13 percent of consumers owned a prepaid debit card, up from 12 percent in 2010. The growth trajectory isn’t slowing down – some say prepaid cards could become a multi-billion industry to rival that of basic savings and checking accounts.
In all, more than 28 percent of households limit their use of banking services. This is by far the fastest growing market in all of consumer finance, and a trend which analysts say is good for both consumers and big banks. Prepaid credit cards are forcing banks to compete on price and service, something few banks ever had to do because banking was – until the electronic age – mostly limited by geography.
Source:
creditcardflyers.com
