Americans Are More in Love With Prepaid Cards

What's Hot

Do This or Your iPhone Bill May SkyrocketSave

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

11 Places in the World Where You Can Afford to Retire in StyleMore

What You Need to Know for 2017 Obamacare EnrollmentFamily

8 Things Rich People Buy That Make Them Look DumbAround The House

32 of the Highest-Paid American SpeakersMake

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

More Caffeine Means Less Dementia for WomenFamily

9 Tips to Ensure You’ll Have Enough to RetireFamily

30 Awesome Things to Do in RetirementCollege

5 Spots Where Retirees Can Live for Less Than $40,000Real Estate

10 Ways to Reduce Your Homeowner’s Insurance RatesFamily

10 Ways to Pull Together the Down Payment for a HomeCredit & Debt

Chew on This: The Story Behind Your Hershey’s Halloween TreatsBusiness

These cards have lower fees and better terms than they did a few years ago, but they do have drawbacks.

American consumers have grown increasingly fond of reloadable prepaid cards, putting about $65 billion of their money on them in 2012 — double the amount loaded in 2009. And the cards are much more user friendly and have fewer fees than when they arrived on the scene several years ago, says a new report from The Pew Charitable Trusts.

Pew wrote:

The increasing popularity of the cards is good news for consumers who want an alternative to traditional checking or credit accounts — particularly because these cards have become more affordable over the past year and, in many cases, offer lower and fewer fees than basic checking accounts.

About 12 million Americans use a prepaid card at least once a month, Pew says. The average household income of a prepaid card user is $30,000 a year.

Many of them have had or still have checking accounts and credit cards, and 2 in 5 who’ve had a checking account said they closed or lost the account because of overdraft fees.

To many users, a prepaid card is a tool to keep them from overspending.

The report said:

Most customers’ primary motivation for using prepaid cards is to gain control over their finances. The top four specific reasons they use the cards are to:

  • Buy things online.
  • Avoid credit card debt.
  • Avoid spending more money than they have.
  • Avoid overdrafts.

But these cards have some drawbacks, and people need to be aware of them. Pew says:

  • They don’t come with the limited liability protection that you’d get with a checking account.
  • Not all cards provide Federal Deposit Insurance Corp. protection for your funds in case the issuer goes belly up.
  • “Arbitration agreements, which require a customer to settle any dispute using a private, third-party decision maker, are increasingly included in prepaid cardholder agreements,” the report says.

Have you used a reloadable prepaid card? Tell us why in the comments below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 7 Ways to Save More at Big Lots

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,696 more deals!