Prepaid Debit Cards: The New Big Thing?
What’s in your wallet? No really. If you are like a growing number of American consumers nowadays, there is most likely at least one, if not more prepaid debit cards hanging out in your wallet. But why? What is this new trend all about? Are people really (gasp!) getting prepaid cards on purpose? Can prepaid debit cards be another tool in your financial tool box? Let’s take a look.
Just the Facts, Please
First, look at the facts. The reality is the use of prepaid debit cards continues to increase nationwide. In the last year reported, 2012, prepaid debit card use had risen to $64 billion dollars. That’s up from $56.8 billion dollars in 2011.
Just in case you didn’t know, there was a time not so long ago that these cards were a sort of poor man’s bank. When the poorest of the poor couldn’t scrape up enough dough to maintain a checking account, they could usually count on prepaid debit cards.
However, now there is a new group of consumers embracing these cards. According to research from PewStates.org, a reported 59% of prepaid debit card holders also have a checking account. Not only that, but a startling 75% of that number is under age 50. In other words, prepaid cards have moved up the ladder, so to speak. Prepaid debit cards are found right there in middle class wallets.
Big Players Pile In
Get this. The growing use of these prepaid debit cards has attracted the attention of the big players in banking. You may have noticed that in years past, prepaid cards were only available from strange and unknown institutions. That has all changed. Now, you will find virtually all of the major banking institutions offering up some form of prepaid debit card.
PewStates research suggests that this relatively new embrace of prepaid cards is a sign that consumers are tired of the same old same old. Many of these consumers are fed up with traditional banking. They are weary of having to head into a branch bank and deal with a surly teller who is busy texting on her cell phone between customers. They are fed up with onerous and mysterious fees that seemingly change every other month. In short, they are looking for a better alternative.
There’s an App for That
Yes, its true. Many prepaid debit card providers make it super easy to deposit funds to the card. They provide customized apps for the iPhone or Android devices. This app allow a deposit by simply snapping a picture of the front and back of your check. In other words, prepaid cards offer a level of convenience not often matched by traditional banking institutions.
A New Tool?
Apparently so. The research points to yet another explanation for the increased use of prepaid cards. Consumers are using them as a financial tool. Many of these consumers are using prepaid debit cards to stick to a budget. Which, if you think about, is actually pretty cool. So, if you budget $200.00 per month for dining out, and you only use your prepaid card for dining out with no exceptions, you will meet your budget easily.
Now, like all things financial. Prepaid cards do have a few drawbacks. For one thing, using your prepaid debit card does nothing to boost your credit score. That’s simply because a prepaid debit card does not represent credit at all. In many ways, its equivalent to using cash. In other words, whipping out your prepaid card to pay won’t affect your credit score at all.
Yep, there are fees, and then there are fees. Some debit card providers charge a monthly fee, some charge a per use fee, etc. However, it is important to note that with the increased competition for that coveted space in your wallet, many of these fees have been significantly lowered or even dropped entirely.
Should You or Shouldn’t You?
Well, obviously you need to take a good look at your financial situation and see if it makes cents (yep, pun put there on purpose). If so, go for it. Shop around and find the best prepaid debit card for you.
There you go. The 411 on prepaid debit cards. What do you think? Do you have one of these cards?