The Financial Services Roundtable recently released another iteration of its Fast Facts, reliable, bullet-point research about issues facing the financial services industry. Topics span TARP, Dodd-Frank, insurance, lending, retirement savings and more. This iteration focuses on the ins-and-outs of prepaid cards: a flexible financial alternative for underbanked individuals.
A flexible financial alternative for underbanked individuals, prepaid cards are among the fastest growing payment products in the United States, proving to save money both for users and the American taxpayer.
FACT: Prepaid cards provide an effective alternative for millions of consumers who don’t have access to a checking account and, increasingly, a convenient additional financial tool for many consumers who have checking accounts. Almost $1 trillion in payments from employers and the government are made to 80 million adults in the U.S. who are financially underserved. For many, replacing paper checks with direct deposits is not an option.
FACT: Prepaid cards allow the 11 million households in the U.S. without bank accounts to be part of the mainstream American economy, make electronic payments, and receive electronic fund transfers.
FACT: A 2012 study finds that 73% of prepaid card holders are highly satisfied with the product, 61% prefer prepaid cards to credit cards, and only 37% prefer to use cash.
FACT: Prepaid cards are inexpensive to use. According to a 2011 Bretton Woods study, prepaid cards only cost users an average of $185 per year, while it costs on average $273 per year to use a basic checking account and $256 per year to use a check casher.
FACT: A 2012 Pew study found that prepaid cards are less expensive than checking accounts for financially inexperienced consumers.
FACT: Prepaid cards are widely accepted. Cards from large brands, such as Visa and MasterCard, can be used everywhere debit cards are accepted and at millions of ATMs worldwide.
FACT: Prepaid cards are safe by allowing consumers to make purchases and pay bills without carrying large amounts of cash. In addition, prepaid cards frequently provide zero liability to the cardholder if it is lost or stolen.
FACT: Nearly all prepaid cards in the U.S. are issued by banks, as a 2012 survey found 47 percent of banking customers are more likely to use prepaid cards if offered by their financial institution.
FACT: Prepaid are useful for all kinds of people in a variety of contexts. For example, they facilitate inclusion and build financial literacy skills by helping families limit spending and stay on a budget.
FACT: Prepaid cards are used by people of all income levels. Of those who are likely to use prepaid cards, 26.4% earn less than $35,000 per year, 36.7% earn between $35,000 and $65,000 per year, 22.1% earn between $66,000 and $100,000 per year, and 14.8% earn over $100,000 per year.
FACT: Governments are turning to electronic payments because they are efficient and cost effective. Prepaid cards allow those without bank accounts, including 4 million Social Security recipients, to still receive their payments in an easy, electronic way.
FACT: Prepaid cards save taxpayer dollars. While it costs the federal government $1.03 to issue each paycheck, it only costs 10.5 cents to issue an electronic payment. The U.S. Treasury estimates it will save more than $1 billion over 10 years by switching from a check-based system to electronic payments with a prepaid card option.
FACT: Prepaid cards save paper. The U.S. Treasury estimates it will save 12 million pounds of paper over 5 years from making Social Security payments electronically.
FACT: A spring 2012 study finds that 95% of recipients are satisfied with the Treasury’s electronic benefit payment system and 93% would recommend it to friends and family.
You can view all previous Fast Facts at www.RoundtableResearch.org. Copyright © 2013 The Financial Services Roundtable, All rights reserved.