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Prepaid cards offer advantages for consumers

Aug 07, 2012 Sean Albert

The number of underbanked - consumers who do not have traditional bank accounts or credit cards - is steadily increasing in the American economy. Many lenders are looking for ways to reach out to these individuals, as they represent a large and relatively untapped market. Short term lenders, including short term loans and pawn shops, are one option for these consumers, as are prepaid credit and debit cards, which have recently seen an increase in use. The Statesman reports that NetSpend, an Austin, Texas-based prepaid card company, recently reported a strong rise in its second quarter earnings. NetSpend reaches out to underbanked consumers and has seen steady success over the past year. For Q2, the company's net income totaled $10.2 million, representing a 34 percent increase from 2011's second quarter. NetSpend's revenue also rose over the past year, coming in at $85.3 million. The recent success is due to the fact that there was a rise in the amount of active cards being used by consumers, says the news source. While prepaid cards offer many advantages for underbanked individuals, CNBC reports that the alternative finance option is also being used by middle income consumers. Research by Mercator Advisory Group found that in 2011, approximately $57 billion was loaded onto prepaid cards.