Payments

10:45 AM
Connect Directly
Facebook
Twitter
Google+
RSS
E-Mail
50%
50%

Prepaid Card Costs Rising

A new report from CardHub also finds that prepaid cards are rising in popularity.

Prepaid card deposits are expected to rise to $168.4 billion by 2015 as their popularity continues to rise among consumers, according to a new report from CardHub, which examined 26 different prepaid card products.

According to CardHub's findings, the amount of money loaded on general-purpose reloadable prepaid debit cards almost tripled from 2008 to 2012, rising to $76.7 billion. Primer drivers for this include the rising cost of traditional banking products and increasing distrust of financial institutions, the report found.

However, using a prepaid card is getting more expensive, with such cards to be 21 percent more expensive in 2014 than in the previous year.

Further, not all prepaid cards are equal. Fees associated with different prepaid cards can vary greatly, and CardHub found that most consumers do not do enough comparative analysis when choosing a card.

"Prepaid cards can be a great tool for a lot of people as they are safer than cash and offer no overdraft fees, no bounced checks and guaranteed approval," the report reads. "However, the cost of prepaid cards varies greatly, depending on a customer’s usage and unfortunately, according to a 2014 Pew study, only 32% of consumers compared the terms and fees before choosing a card, while most simply selected a card while in a store."

According to the report, annual costs for prepaid cards can range from $0 to $400 per year, which makes choosing the right card important. Further, celebrity-founded/endorsed cards are between 33 percent and 51 percent more expensive than non-branded prepaid cards, as CardHub examined cards endorsed or founded by Justin Bieber, Lil Wayne, George Lopez, and Russell Simmons.

The report also found that prepaid cards from large banks are up to 87 percent more affordable than those from smaller institutions.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
Page 1 / 2   >   >>
KBurger
50%
50%
KBurger,
User Rank: Strategist
7/22/2014 | 4:39:01 PM
Re: Celebrity cards
I guess I shouldn't ask, "Who's Lil Wayne?" KIDDING, I know who he is. Isn't he related to Lil Kim?
Kelly22
50%
50%
Kelly22,
User Rank: Author
7/22/2014 | 1:40:59 PM
Re: I want the Justin Bieber card
I'm pretty surprised to see such a big rise in prepaid cards as well.

Playing the celebrity card (ha) definitely works. I'm reminded of a BST story from a few weeks back in which the writer taught his kids financial responsibility with prepaid cards... something tells me that a lot of those Justin Bieber cards are going to the same population that takes Justin Bieber backpacks to school. Maybe they're trying to appeal to younger audience with the celebrity endorsements. 
Jonathan_Camhi
100%
0%
Jonathan_Camhi,
User Rank: Author
7/22/2014 | 11:30:12 AM
Re: Celebrity cards
That was Lil Wayne when he used to use cash for most trasnactions. Now that he's got a prepaid card, he's much more fiscally responsible. Fact: you can't make it rain with a prepaid card.
Byurcan
50%
50%
Byurcan,
User Rank: Author
7/22/2014 | 11:23:21 AM
Re: Celebrity cards
Well, they're not my examples, I had no idea lil wayne had a prepaid card until reading this report.
Becca L
100%
0%
Becca L,
User Rank: Author
7/22/2014 | 11:21:48 AM
Re: Celebrity cards
The celebriteis you've used as examples dont seem like the most fiscally responsible either.
Byurcan
50%
50%
Byurcan,
User Rank: Author
7/22/2014 | 11:17:10 AM
Re: I want the Justin Bieber card
Presumably, the ones with $0 fees have other add ons they charge you for that people elect to use. That's what I would guess.

I always wonder why brands pay celebrities millions of dollars to endorse things, I always feel like "why would someone use this product because a celebrity endorses it?" But apparently it works, there are people in the world who will choose a prepaid card because Lil Wayne says so.
Becca L
50%
50%
Becca L,
User Rank: Author
7/22/2014 | 11:16:23 AM
Re: Celebrity cards
I don't know why people by Justin Beiber backpacks and singing toothbrushes either, but clearly the market has spoken.

To be fair, celebrity faces are more interesting than generic designs, and perhaps the celebrity endoresment bears resemblance to the prestige placed on Amex gold cards and the like.
Byurcan
50%
50%
Byurcan,
User Rank: Author
7/22/2014 | 11:15:02 AM
Re: Celebrity cards
Well, I could have told you that. I think the last TV show I regularly watched was Seinfeld. I have no idea what's happened in pop culture for the past decade or so, and it's been quite blissful.
Becca L
50%
50%
Becca L,
User Rank: Author
7/22/2014 | 11:13:24 AM
Re: Celebrity cards
Clearly Bryan, you're just not "with" it :-)
Becca L
50%
50%
Becca L,
User Rank: Author
7/22/2014 | 11:12:27 AM
I want the Justin Bieber card
Wow, interesting read, I had no idea prepaid cards were increasing in popularity like this.

Interesting too that customers are being "swindled" into prepaid cards that work against them. Especially wowed that they do no comparison shop when "distrust of financial institutions" is a main driver of their use. Perhaps the concepts of pre-paid cards is so simple they don't feel there's much to really inquire about. Maybe?

I am also saddened, but not too surprised, that celebrity endorsement is part of the issue - driving customers to unnecessary fees.  Which leads me to ask, sow are the cards with annual costs of $0 making a profit?
Page 1 / 2   >   >>
Register for Bank Systems & Technology Newsletters
White Papers
Current Issue
Bank Systems & Technology - August 2014
Modern core systems are emerging as the foundations of effective channel integration and customer engagement initiatives.
Slideshows
Video
Bank Systems & Technology Radio