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