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New Spending Habits Pave the Way for Prepaid Cards

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Americans have drastically changed their spending and card use habits since the end of the recession, and that is being reflected in the types of accounts they carry, as well as the new avenues they are seeking to complete transactions.

A number of consumers stopped using credit and debit cards last year, and instead adopted prepaid cards as their preferred method of making a purchase, according to a report from Bloomberg News. The latest data from Javelin Strategy and Research shows that the number of adults nationwide who had a credit card in their name slipped to 67% in 2011, from the previous year’s total of 74%, and debit cardholders fell to 66% from 78%.

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Meanwhile, the number of prepaid cardholders rose from 11% to 13% , the report said. Perhaps predictably, spending on those accounts surged 18% last year.


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“People used to think of them as cards for people who didn’t have a lot of money, whereas today they’re becoming much more common for a variety of uses and a variety of demographics,” Beth Robertson, director of payments research for Javelin, told the news agency.

However, card spending may simply be increasing overall, as the people who retained their debit and credit accounts have been using their cards far more often. First Data Corp. recently found that credit use rose 5.7% on an annual basis in March, while PIN debit transactions jumped 14.6% and signature debit climbed 8.4%.

At the same time, more data from Javelin suggests that consumers might be moving away from the traditional automatic bill payment options afforded them by their chosen financial institutions, and instead going through third-party companies specializing in this type of transaction, according to a report from American Banker.

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Some experts believe this shift is because it will allow them to put their bill payments on a credit card, rather than simply deducting the amount owed from their checking or savings accounts.

The recession caused millions of consumers to drastically rethink their relationships with various types of accounts, and since that downturn ended, many have instead taken to using their cards to finance purchases while not carrying a balance from one month to the next. Credit card debt has fallen considerably during the past year or so as a result.

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