CHICAGO–The recession is driving greater usage of prepaid cards as many leading many issuers to raise their underwriting standards on credit and debit cards and yank or reduce consumers’ lines. The trend has also created an opportunity for prepaid providers to sign up a different type of consumer.
Voluntarily or not, some consumers have already made the switch from credit to prepaid, according to a study published by the Network Branded Prepaid Card Association, a trade group, and the Center for Financial Services Innovation, a nonprofit affiliate of Chicago’s ShoreBank Corp.
Of the 400 prepaid cardholders surveyed in March, 47% said they used to have a general-purpose credit card, and 33% said they still had one. Of those who had or once had such a card, 74% said they were “somewhat” to “not at all” satisfied with the experience.
The reloadable prepaid card “is a noncredit payment tool that has virtually ubiquitous use that is attracting more people either because their credit is challenged, or because it’s a budgeting tool,” said Kirsten Trusko, the trade group’s president and executive director.
Among the companieis seeing growth is Green Dot Corp., a prepaid distributor that helps run programs for retailers like Wal-Mart Stores Inc. and banking companies like Citigroup Inc. and also sells cards bearing its own name.
Mark Troughton, Green Dot’s president of cards and network, said the Monrovia, Calif., company, whose customers currently number “in the millions,” is “well exceeding” its forecast that the figure will grow more than 50% this year.
