According to CardHub, market research firm Mercator Advisory Group expects Americans to load $343 billion on prepaid cards in 2018, more than four times the $76.7 billion loaded in 2014. It's a sign that consumers are embracing them as a lower-cost alternative to traditional bank accounts. A study released Thursday by CardHub, however, argues that consumers need to be picky about which card they choose because their fees can vary widely, as do their features.
There are four different types of prepaid cards (replacements for checking accounts, helping children manage their allowances, an alternative to check cashing stores, and means to ensure safe access to electronic transactions.) Fees for most cards have fallen on average 8.21 percent over the past year. Fees for alternative-check cashing cards, however, have surged almost 35 percent during that same time. Some high-cost products associated with celebrities, such as reality star Kim Kardashian, that were criticized in media reports are no longer on the market.
Consumers need to remember that each type of prepaid card has a "free" option which costs nothing to obtain and maintain, which can save consumers up to $311 per year, the site says. Users of "free cards", though, are subject to penalties for overdrawing their accounts among other reasons.
CardHub used its proprietary cost comparison tool to evaluate 40 of the most popular prepaid cards based on four hypothetical scenarios that reflect typical usage habits. Click here for the results.