Banks have begun issuing more prepaid cards to increase revenues lost to laws such as the Credit Card Accountability, Responsibility and Disclosure Act and the Dodd-Frank Consumer Protection Act, and these accounts have been adopted quickly by many groups, according to a report from Bloomberg Businessweek. In particular, prepaid cards have become popular with state governments who issue benefits on them, rather than by mailing paper checks. Doing so can save agencies as much as 75 percent of the costs for distributing benefits.
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“We’re just at the beginning of many of our government clients moving from paper to a paperless environment,” Margaret Scopelianos, a treasury services executive at Charlotte, North Carolina-based Bank of America Corp, told the news agency.
Consumers used prepaid cards in transactions worth a total of $65 billion in 2010, up from the previous year’s $48 billion, the report said. The fees businesses paid to credit processing networks for those transactions totaled about $1 billion, and continued growth of the prepaid industry is expected to help institutions bridge the $25 billion in revenues lost to credit and debit card reform laws.
Prepaid cards are also popular among those who cannot afford other bank services, or who have been locked out of credit card borrowing by a history of delinquent and defaulted accounts.
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