In the late 1990s a number of prepaid card products aimed at teenagers were introduced but failed to thrive.
Now some companies are targeting a different market for the cards: people without bank accounts.
In June a company introduced a prepaid general-purpose MasterCard that people can load with value at Western Union offices. Now, Western Union, a division of First Data Corp., says it may introduce a prepaid card of its own.
The card already on the market, called Wired Plastic, was developed by One Global Finance, a small company in Bountiful, Utah, and is issued by Transportation Alliance Bank Inc., an Ogden subsidiary of the diesel fuel distribution company Flying J Inc. It is marketed through bulk e-mailings and promotions to some prepaid wireless telephone customers.
"This card is marketed to a variety of demographics: the unbanked, those who don't qualify for traditional secured credit card programs, and those who travel frequently for company reasons," said David Wilkes, the executive vice president of strategic alliances at One Global Finance.
Ads for Wired Plastic prominently feature the Western Union Swiftpay logo and the fact that the card reports to major credit bureaus, presumably allowing its holders to begin to build a credit record.
But, in this case, building a credit record does not come cheap. After paying a $69.95 fee to obtain the card, users are charged $6.95 a month to maintain it, along with other fees to reload it and to get money from an ATM.
Mr. Wilkes says the card is still a good value when compared with secured and subprime credit cards. "Those cards can charge up to $300 in fees, and you pay interest, finance charges, and late payment fees on a credit card. This is a better alternative than a subprime unsecured."
Telecommunications analysts point out that prepaid wireless services were very expensive when they first appeared on the market but got cheaper as they moved mainstream.
Some potential customers may find subprime cards more difficult to obtain now, said Clay Wilkes, the president of One Global Finance, and David Wilkes' brother. Regulators "are cracking down [on subprime issuers], because they are predatory and their losses are going above 20%," Clay Wilkes said. "It is putting subprime issuers out of business."
David Wilkes said that Wired Plastic receives between 3,000 and 5,000 applications a day and generates nearly 10,000 daily transactions. It can be reloaded through Western Union's Swiftpay service, which also allows prepaid telephone and wireless users to recharge their services by making cash payments at Western Union offices.
Other card issuers are marketing different kinds of prepaid cards - most notably payroll ones - to the unbanked. Gift cards, yet another form of prepaid product, have also made a splash.
It seems that the only prepaid cards that failed to gain traction were the ones targeted to teens, such as the Visa PocketCard and the American Express Co.'s Cobalt. One of the largest remaining youth card marketers, Wildcard Systems Inc. of Ft. Lauderdale, Fla., markets Visa Buxx cards issued by Bank of America Corp. and another product issued through Citigroup Inc., but a Wildcard executive estimated that it had fewer than a million cards in circulation.
Mr. Wilkes says customers will snap up Wired Plastic, even though previous attempts at stored-value cards failed. "Some focused on teen spending and have not developed as well as the industry thought it would."
The card offers customers a way to get more mainstream banking products, he said.
"You can replace a checking account with this card," Mr. Wilkes said. "A lot of people who use debit cards get into trouble with their banks" when they repeatedly overdraw their accounts. The prepaid card, which is authorized and settled in one step, is less prone to overdraft problems, he said.
Money deposited in Wired Plastic accounts is not insured by the Federal Deposit Insurance Corp., according to company literature.
Wired Plastic appeals to the unbanked but will have a larger appeal among people who must sometimes travel for work, because it can be used to rent cars and to pay for hotel rooms, Mr. Wilkes said. He would not release sales figures but said the market is appealing enough to entice others, including Western Union, to launch competing products.
A Western Union spokeswoman confirmed that it is exploring a similar product. The company offered one in the 1990s called Western Union Cash Pay, she said.
Telecommunications analysts said that prepaid general-purpose cards that can be loaded like telephone cards can be helpful products for recent immigrants who need to build a credit record.
"When you move to this country, it is difficult to get a credit card," said Imka Mensah, a vice president with the Boston research firm Atlantic-ACM. "Unless you go to school here, you don't get them."
Another analyst predicted that general-purpose prepaid cards would follow the same adoption curve as prepaid wireless cards, which let people pay for telephone minutes in advance.
"These things get credibility when a lot of people start doing something with them," said Tom Miezejeski, the director of research at Pelorus Group, a Raritan, N.J., company that tracks prepaid phone spending. "It is at that stage now. Everyone is beginning to zero in on the unbanked, credit-challenged, which is a huge segment of the economy. They want to address this marketplace."
