If you've noticed an influx in commercials advertising prepaid debit cards over the last couple of months, you're not alone. Prepaid cards are very much on the rise in popularity and availability, and consequently their presence is being felt all around the personal finance sector.
Sure, prepaid debit cards have been around for years. But with healthy competition spawning some much-improved options for consumers, prepaid cards have become a legitimate game-changer when it comes to personal finances in 2013.
According to a recent report from the Mercator Advisory Group, consumers loaded approximately $82 billion onto prepaid cards in 2012; that's up a full $25 billion from the year before. And according to that same report, prepaid cardholders are estimated to load $117 billion in 2013.
That explains the increase in advertising...
The growth in prepaid debit card use can be attributed to a number of factors. First and foremost, however, would be The Great Recession.
Remember in 2008 when our trust in big banks completely nose-dived? Between government bailouts, Occupy Wall Street protests and the introduction of a number of banking fees, it can be argued that big banks have done little to get back on consumers' good sides more than four years later.
As a consequence, prepaid cards have become a popular alternative to the standard bank-issued debit card. And since plastic is now king when it comes to how consumers choose to spend their money, it makes sense that prepaid cards have become a viable alternative in the aftermath of 2008.
Then, a year later came the Credit CARD Act of 2009, a piece of legislation meant to reform credit card practices and fees. While overall the law has been considered a success in terms of protecting credit card consumers and restricting increased interest rates and unfair fees, it also made getting a credit card a lot harder for younger individuals or those with no credit history.
Given that prepaid cards offer instant approval and require no credit check (because no line of credit is being offered), these products once again proved to be a reasonable alternative for the consumer hoping to carry plastic in their wallet.
Throughout this, however, it should be noted that by and large, prepaid cards carried a pretty bad reputation, which in some cases was completely warranted. Many prepaid cards were (and several still are) crammed with fees; monthly fees, set-up fees, money-load fees, ATM fees, etc. So naturally, the case for buying and carrying a prepaid wasn't a strong one, since carrying cash is free.
With the glut in prepaid card fees dominating the market, it's easy to see why one credit card issuer - American Express - decided to put out a prepaid card that did away with all of the unfair fees and presented issuers with an excellent product. Their American Express Prepaid Card is unlike any other on the market because it does not in clue many of the fees associated with prepaids.
In fact, the only fee attached to this prepaid card is a $2.00 ATM fee - a standard fee we're all used to dealing with - and on top of that cardholders are welcomed into the exclusive AmEx member programs once reserved for credit cardholders only: purchase protection, roadside assistance and their Global Assist® program all come free of charge for prepaid cardholders.
Of late, American Express has introduced a legitimate game-changer to the prepaid world with their Serve® from American Express service. Serve® works as both a physical prepaid card and a money-managing account service that uses recent strides in technology to do the work. With Serve®, AmEx members can load money via email, text message and Facebook, and it's free to own, manage, and consumers can even link up their checking account to their Serve® card.
Like the original prepaid card from American Express before it, prepaid Serve® members will enjoy all of the perks associated with AmEx, plus extras like exclusive retail savings and entertainment access.
So, while celebs like Justin Bieber, Russell Simmons and even Alex Rodriquez compete for your business, remember that, in today's highly-competitive prepaid world, there are some really quality prepaid products available. And with prepaid card use on the rise, hopefully a "good" prepaid debit card will become the standard, not the exception to the rule in 2013.
With the potential for new regulations on prepaid cards stemming from a continuing investigation by the Consumer Financial Protection Bureau, this may very well be the case.
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