Jun 10, 2013 Sean Albert
The use of prepaid products such as ACH cards is increasing across America. In previous years, these alternative payment options were confined to subprime consumers, according to The Street.
However, the source noted that the advent of feeless prepaid cards has made the use of these electronic payment tools more attractive for the average consumer. Also, it's been advantageous for those individuals who are reluctant to use traditional credit cards.
The prepaid industry has adapted to the needs of customers, the source stated. Rather than featuring high fees on everything from ATM transactions to monthly rates, many institutions offering prepaid cards have scrapped fees in order to attract high volume purchasers.
Last month, Bankrate released its annual prepaid card survey, and the company's findings backed up many of the trends. The survey found that two-thirds of prepaid products either have no monthly fee tacked on or offer a waiver for monthly payments. The same number of cards did not have an activation fee. Experts with Bankrate commented that many financial institutions are helping consumers control spending with the emerging product.
"Many offer cards with low, fixed monthly costs. The ability to know the total monthly cost in advance is valuable to consumers, particularly with the decline in free checking accounts," said Greg McBride, Senior Financial Analyst for Bankrate.
The study found that none of the prepaid card issuers surveyed charge customers for adding more money onto their cards. Also, 92 percent do not have fees associated with making bill payments via prepaid products.
Frugal buyers want to limit spending
As it has become more expensive for consumers to establish and maintain traditional banking accounts, Bankrate - in a separate article - said Americans have explored alternative payment options.
According to the source, banks have had to adjust to a change in the economic climate. Notable reforms that are a by-product of the Great Recession have forced the institutions to adapt. Lower-interest rates and tight regulations have reduced the size and scope of traditional revenue streams for banks. For many big financial institutions, this development has forced them to increase fees associated with checking accounts and other services.
To combat unnecessary spending related to checking accounts, many consumers have found that prepaid cards are a viable tool to help reduce expenses.
As this alternative option to credit gains popularity, it could change how consumers and financial service providers operate. Based on the emerging trends, prepaid card use could be a major factor in future economic developments.