The use of prepaid debit cards has become increasingly popular in recent years, and most experts believe that this trend will only become more common in the future. Analysts estimate that about $82 billion dollars will have been loaded onto prepaid debit cards by the end of 2012, and by the end of 2014 that annual figure will have jumped to an astonishing $167 billion. The numerous benefits of using prepaid cards have become quite apparent to consumers, and their demand has only spurred on the prepaid industry to greater heights. Even now, high-profile banks such as U.S. Bancorp and JPMorgan Chase have already started offering prepaid debit cards of their own.
But what exactly are the advantages of prepaid debit cards?
It’s easy enough to get a prepaid debit card: you just have to prove that you’re over 18 and you’re good to go. You can buy these cards in a store or, far more common these days, from the Internet. In contrast, establishing a checking account is much more complicated, and the standards required for regular credit cards are far more stringent. With credits cards, many people do not have the required credit scores—a situation which only leaves them with the prepaid option.
Prepaid debit cards are also very easy to use. You can add more money to your account whenever you want. You can use them to purchase items at most retail stores, and you can withdraw money from any ATM machine. It functions just like a standard bank debit card without the need for a checking account. Some prepaid debit cards now also offer savings accounts and the ability to pay bills online.
According to a recent study released in September 2012 which was conducted by Pew Charitable Trusts, people who have the tendency to overdraft will find the use of prepaid debit cards a much cheaper alternative than checking accounts. These results were a surprise to the researchers, who have previously believed otherwise. In their findings, the average inexperienced consumer who tends to overdraw their accounts and thus incur penalties spends less than $30 dollars a month for prepaid cards. In contrast, people with the same spending habits who use checking accounts instead spend an average of $94 every month.
Encouraging Responsible Spending
Many parents have come to rely on the use of prepaid debit cards for their children as a way of teaching and enabling them to spend responsibly. Parents can give their children their spending money through this method without having to hand over actual cash or giving the children access to their personal bank accounts. Children also learn how to spend responsibly because most debit cards do not allow users to spend money beyond was what already loaded on to the card.
It is this feature, in fact, that has also caused its popularity among adults as well. With regular credit cards, the temptation to spend over the affordable limits is too great, and some people have simply been unable to stop themselves from incurring massive debts. With a prepaid debit card, this is simply not possible, which prevents users from having to pay exorbitant fees.