Tag Archives: prepaid cards

Millennials big fans of prepaid cards, payday loans

Quick access to cash and credit is the priority, survey finds.

Millennials shell out for convenience.

That’s what a new survey to be released Friday and given exclusively to USA TODAY suggests when it comes to the generation’s use of alternative financial products that often come with high fees.

The survey of more than 1,000 people ages 18 to 34 by alternative financial products company Think Finance found that while 92% currently use a bank, nearly half, or 45%, say they have also used outside services including prepaid cards, check cashing, pawn shops and payday loans.

For a generation in which many are finding themselves cash-strapped, in debt from student loans and underemployed, convenience appears to trump getting stuck with extra charges when it comes to quick access to cash and credit.

“It’s flexibility and controllability that’s really important for Millennials,” says Ken Rees, president and CEO of Think Finance. “Banks don’t have great products for people who need short-term credit. They’re not really set up for that.”

And he points out that more than 80% of survey respondents said emergency credit options are at least somewhat important to them.

These are options that have been historically known for charging fees — check cashing can cost up to 3% of the amount of the check, and more depending on the company and how much you’re cashing. Most prepaid debit cards come with at least a monthly fee, and more fees for checking the account balance, ATM withdrawal or activation among others, found a survey of prepaid cards by Bankrate.com in April. Continue reading

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Why Prepaid Cards Appeal to Hackers

Prepaid cards have been at the heart of several data breaches in recent years because their traits can make them easier for fraudsters to exploit.

But overall, prepaid cards are as safe as any other payment instrument available to consumers, industry experts say.

Last week’s arrests in a $45 million ATM cash-out scheme involved prepaid card accounts handled by two processors later identified as enStage and ElectraCard. A breach at Fidelity National Information Services in 2011 and one at WorldPay in 2009 also involved prepaid cards.

“The difference with prepaid cards [from other payment cards] is they can be bought anonymously, and are not necessarily registered with a bank,” says Madeline K. Aufseeser, senior analyst with Boston-based Aite Group.

A consumer can buy a prepaid card, load money onto it and then use it for a short period of time to take money from it, all before being required to register the card, Aufseeser says.

“So, it’s not the card itself, but the way it can be used as a tool to get money,” she says. Continue reading

3 Credit Card Predictions For 2012

At the start of 2011, credit cards were coming off of a bad year. Consumers were understandably credit shy in the aftermath of the recession, so much so that the debit card became people’s payment of choice for the first time ever, and new regulations severely hampered issuers’ ability to entice consumers who hadn’t been burned (namely students) into the marketplace.

But as the year wore on, issuers – bolstered by the fact that debit cards were suddenly a whole lost less lucrative – found more (and oftentimes unique) ways to incentivize credit card use. At the same time, the memories of being burned by a tiny piece of plastic seemed to dim. But what’s in store for the industry in 2012? MainStreet breaks down what it expects consumers will see.

Prepaid debit cards will continue to invade the space. Issuers started to take an interest in the prepaid space even before the Federal Reserve’s 21-cent interchange fee cap made traditional debit cards much more expensive for them. Both American Express (Stock Quote: AXP) and Capital One (Stock Quote: COF) introduced low-fee versions well before the cap (which prepaid cards are conspicuously exempt from) was official.

But MainStreet thinks consumers should expect to see even more innovative prepaid offerings in 2012, perhaps even with rewards, as Card Hub CEO Odysseas Papadimitriou has speculated. That’s because prepaid cards help issuers get around another piece of legislation: the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which put limits on the student card credit consumer base.

An attempt to tap back into the younger demographic spanned several newbusiness models in 2011 that consumers should expect issuers to either copy or build upon in 2012. Amex, for instance, introduced a prepaid card this year that also functions as a student ID.

Lucrative sign-on bonuses and innovative rewards will continue to thrive.The extra-competitive marketplace in 2011 forced issuers to find a way for their rewards cards to stand out, resulting in some of the bigger sign-on bonuses or promotional offers we’ve seen in a while. At one point, Chase (Stock Quote: JPM) was offering $300 back to new Freedom cardholders who spent $500 in the first three weeks of having an account open. Discover (Stock Quote: DFS) and Citi (Stock Quote: C) were also offering $100-plus sign-on bonuses on some of their no-annual fee cards this December as well.

Experts told Mainstreet just this month that they expect this trend to continue through 2012, and we’re inclined to agree. Those looking to add a credit card to their arsenal next year should look for high sign-on bonuses with low spending thresholds, and there should be plenty available to choose from. 

Credit card delinquencies will increase. After remaining steady throughout all of 2010 and half of 2011, the proportion of borrowers who are 90 or more days past due on their bills inched up from 0.6% to 0.71% during this year’s third quarter, TransUnion reported in November. The uptick was attributed to issuers’ renewed interest in subprime borrowers, a trend the credit bureau – and MainStreet – believes will lead to more delinquencies in the new year.

3 Credit Card Predictions for 2012. (2011, December 22) By Jeanine  Skowronski. Retrieved from http://www.mainstreet.com/article/moneyinvesting/credit/debt/3-credit-card-predictions-2012.