Personal Finance

Most Banks Now Offering Prepaid Cards

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Prepaid Debit CardsIn the past few years, the fastest-growing type of card-related transaction came on prepaid accounts, and now more banks seem to see the opportunity that offering such a payment option provides.

These days, most financial institutions are offering prepaid cards of some kind, either the general purpose reloadable accounts most commonly associated with this kind of purchasing, or those that are more like gift cards, according to a new survey from the American Bankers Association. In all, 52 percent of institutions say they currently offer general purpose prepaid accounts or will do so in the near future, while 58 percent said the same for prepaid gift cards.

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However, a far greater majority – 85 percent – said they view demand for these types of accounts among their customers as being either favorable or highly favorable, the report said. That may spur greater interest in making these kinds of accounts available to borrowers in the near future.

Free Credit Check Tool“This survey will help banks see how other banks are approaching the prepaid market and where opportunities may lie,” said Christopher McClinton, vice president of ABA Payments Solutions. “It will also show prepaid suppliers the key challenges they need to address if they want to sell their products to banks that are currently on the sidelines.”

Of course, despite the growing popularity, there is still a large proportion of banks that do not issue these cards, and this is for varying reasons, the report said. For instance, 34 percent said they were concerned about being able to meet all the various regulatory requirements that come with issuing such an account, and another 26 percent are unsure of whether it would be profitable enough.

However, the survey also found that if banks issue prepaid cards, they are also more likely to be satisfied with having done so, the report said. Most now say one of the main reasons they issue these cards to keep existing customers happy, but also attract new ones who may not currently have bank accounts at all.

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Consumers are considered “underbanked” are those who do not have traditional accounts with financial institutions, often because they cannot afford the costs that may come with them. Some studies have shown that prepaid cards are often a more affordable alternative to normal checking and savings accounts.

Image: seishin17, via Flickr

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