The use of prepaid cards has skyrocketed, thanks in part to rising popularity among consumers who already have a checking or savings account, according to the Pew Charitable Trusts.
The use of general-purpose, reloadable prepaid cards increased 50% between 2012 and 2014, Pew reported in its Banking on Prepaid study, released on Tuesday. Much of the growth was tied to increased use by consumers who have access to mainstream financial products.
Pew also reiterated its call for the Consumer Financial Protection Bureau to adopt its proposal to require issuers to make prepaid-card disclosures clearer. The Washington, D.C., organization said that unbanked consumers use prepaid cards more often, reload them more frequently and register the cards more often.
"When a prepaid card is someone's only transaction account, it is especially important to ensure that the card is safe and comes with uniform protections against theft, loss, and deception," Susan Weinstock, director of Pew's consumer banking project, said in a news release.
While unbanked consumers remain the largest users of prepaid cards, they're becoming more popular with consumers who do use mainstream financial products, according to the Pew study. The number of adults with a checking account who use prepaid cards grew from 4% to 7% between 2012 and 2014. The number of users among unbanked consumers was little changed in that period.
Adults who have a checking account are more likely to obtain a prepaid card from a bank or credit union, Pew said. However, most consumers buy prepaid cards from other retailers.
Both consumers who have a checking or savings account, and those who don't, use prepaid cards for savings or budgeting tools. Both groups are also wary of overdraft fees and prefer to have a transaction declined than incur a fee. Unbanked consumers, in particular, are likely to use prepaid cards to avoid overdraft and check-cashing fees.
In other findings from the Pew report:
- More than a quarter of banked consumers buy prepaid cards for one-time use and will often buy a new card instead of reloading an existing one.
- About three-quarters of unbanked consumers check card balances daily or weekly, compared to 52% of banked consumers.
- About 74% of unbanked consumers register prepaid cards and obtain deposit insurance, compared to 52% of banked consumers.
- About 90% of prepaid card users do not realize the cards carry federal deposit insurance.