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Prepaid cards gathering steam among consumers

26/01/2012 - By Alexander Galasso

Prepaid cards are gathering steam among consumers.

Prepaid debit cards are gaining traction once again, as consumers search for low-cost alternatives to traditional financing channels such as credit cards.

Interestingly, both federal and state governments are using prepaid cards to distribute government benefits, including unemployment compensation and social security. Furthermore, according to Bretton Woods, consumers pay a minimum yearly cost of $76 to use prepaid cards, compared to $218 for low-balance checking accounts.

"Not only is there is a cultural shift happening in the way businesses and governments manage their payments, but also in the way people manage their finances," said Kirsten Trusko, president and executive director of the Network Branded Prepaid Card Association.

Many young people are opting for prepaid cards because they either can't qualify for a bank account or don't want to pay for fees on checking accounts, Trusko added.

Nonetheless, credit card use has also been rising as consumers continue to show improved confidence in the economy. According to the latest First Data SpendTrend report, credit card processing increased by 6.1 percent in December, as dollar volumes on transactions rose by 6.8 percent.

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