AppId is over the quota
It’s clear that prepaid debit cards — cards that you load with cash, spend down and then reload — are hot.
In 2009, consumers loaded roughly $29 billion on such cards, which are especially popular with young adults and those considered underbanked — meaning they have little access to mainstream financial institutions like banks. But by next year, that amount is expected to reach $202 billion, according to an estimate cited in a report from an arm of the Pew Charitable Trusts. Even the budgeting guru Suze Orman is marketing a prepaid card.
So to gain insight into why consumers are using the cards, researchers from Pew’s Safe Checking in the Electronic Age project convened focus groups last fall in Houston and Chicago.
The project recently released some of its findings, along with excerpts from the comments made by participants in the focus groups. The gist of the findings is that users do not like some of the fees associated with prepaid cards, but seem to prefer them over higher and, from their perspective, less predictable fees that come along with traditional checking accounts.
Some of the comments are not only enlightening but also fun to read, so I decided to share some here. (You can read more in the full report).
Here’s one of my favorites, in which a Chicago woman re-enacts a telephone call she made to the customer service number for her prepaid card to question a charge — only to learn that she was being charged for the inquiry. (The card brand isn’t identified.)
Participant: “It was like, ‘Ma’am, you get charged for calling customer service.’ ‘I’m getting charged now for calling you all about the money that I got charged?’ She was like, ‘Yes, I’m sorry.’ I was like, ‘The next time I load my card, I have to pay for the fees that you charge me for talking to you right now?’ ‘Yes.’ ‘O.K. ’Bye.’”
Yet participants seemed to prefer the fees associated with prepaid cards, which Houston participants described as more transparent, to charges like overdraft fees that can come into play with checking accounts at banks.
Male Participant: “Compared to my situation, I went through a lot of late fees with the credit cards, extra fees with the checking accounts. I was paying monthly between $35 to $50 in fees compared to $3.99 that I pay for a maintenance fee to get a card.”
Female Participant, on the prepaid card fees: “I think they are fair because they’re upfront. I’m thinking in contrast to a checking account. I think the ambiance and the idea of the marketing behind a checking account is they’re your friend; they’re your hometown bank. You can depend on them. You can count on them and, really, they’re just lulling you into the sense of comfort because they’re going to whammy you with fees on the backside. Whereas prepaid debit cards, they’re very upfront. This is the cost of the card; this is the cost for the services. It’s up to you at that point.”
Several participants seemed uneasy about the notion of adding credit options to prepaid cards, since they see a major benefit of the cards as helping them stick to a budget and avoid overspending.
Female Participant (Chicago): “It defeats the purpose of a prepaid debit card because it is, like, it’s a credit card. You can use money that you really don’t have to pay back, and I wouldn’t want to do that because I know I’m just going to get myself in some trouble.”
Have you used prepaid debit cards? Are the fees charged for them worth it for the service the cards offer?
View the original article here
