Reloadable Prepaid Cards Are Low-Cost Options Compared to Other Financial Tools According to Annual Bretton Woods Analysis

MONTVALE, N.J., March 12, 2012 /PRNewswire/ -- According to the third annual Analysis of General Purpose Reloadable Cards released today by Bretton Woods, Inc., consumers who utilize a reloadable prepaid card to manage their finances can do so at a relatively low cost - as little as $8 per month - often paying less than the costs associated with low-balance checking accounts or the costs associated with cash-based lifestyles that include utilizing money orders and check cashing services. The steady growth of branded prepaid cards, used as alternatives to high-cost checking accounts and as a way for the unbanked to gain access to the payments system, is reinforced by the 2010 Federal Reserve Payments Study.

The 2012 Analysis of General Purpose Reloadable Cards found that:

• Consumers that utilize a general purpose reloadable (GPR) prepaid card with direct deposit experience an average cost savings of almost 40% versus a low-balance checking account. Checking accounts have monthly fees that can be avoided with a recurring direct deposit or a daily minimum balance of up to $1,500.  However, the typical consumer of a GPR prepaid card maintains a balance of less than $100.
• Consumers that switch to a reloadable prepaid card with direct deposit versus relying on a cash-based lifestyle experience cost savings of 56% on average.
• Reloadable prepaid card users' costs range $8-$20 monthly if they use direct deposit.
• Low-balance checking account consumers pay in the range of $15-$37 per month.
• Consumers that rely on a cash-based lifestyle pay in the range of $9-$48 per month.

"Some other analyses that judge the costs of prepaid cards and other financial products largely ignore the reality of how consumers actually conduct transactions. Costs for overdrafts, out-of-network ATM transactions and low-balance checking fees and the fact that millions of Americans cannot qualify for bank accounts must be taken into consideration when comparing the costs of traditional bank accounts to the transparent and low-cost fee structure of a general purpose reloadable prepaid card," said Kirsten Trusko, President of the Network Branded Prepaid Card Association.

The comparative analysis was conducted by economist G. Michael Flores of Bretton Woods, Inc., an expert on payment systems and financial institutions. Each year the study has analyzed a range of consumer payment options, including low-balance checking accounts, reloadable prepaid cards, check cashing services, and their relative costs. The Bretton Woods report utilizes independent, third party sources along with input from prepaid card providers to verify fees and typical transaction patterns. Bretton Woods compared the costs of FDIC insured checking accounts from sixteen banks representing 45% of the total deposits in the U.S. and the largest FDIC insured reloadable prepaid card programs.

"For three years running, the undisputable truth is that the costs associated with reloadable prepaid cards continue to be reasonable and most often lower than the costs associated with low-balance checking accounts or cash-based lifestyles," said Flores. "When you take a well-researched picture of how consumers are utilizing financial services today, you find reloadable prepaid cards cost consumers less. I believe that the fair costs, in addition to prepaid cards' convenience and greatly improved consumer protections over the last few years, have driven consumer satisfaction with the products."

Some highlights in the analysis include:

• Prepaid price trending downward: Pricing for reloadable prepaid cards has trended down, while pricing for low-balance checking accounts have trended up.
• Many options to reduce common fees on prepaid: Consumers can use free options to access cash and pay bills, available on most cards, to reduce their fees significantly.
• Bank consumers continue to incur significant overdraft charges: While this analysis uses a conservative estimate of 5 overdrafts per year, studies show that high overdraft activity customers can actually incur 50-60 overdraft charges annually.
• Prepaid consumer profile is evolving: Consumers who choose reloadable prepaid cards are increasingly expanding beyond the 60 million underbanked to include Gen Y-ers.
• Satisfaction with prepaid remains high: Long-term users of reloadable prepaid cards report high satisfaction levels. Prepaid users self-reported that what they like most about prepaid is that they can't overspend/overdraft and it's cheaper than alternatives.
• Prepaid is a compelling option for millions: Consumers do not have equal access to checking accounts, affecting as many as 19% of US adults according to the FDIC. Many cannot qualify for an account due to being listed on ChexSystems or TeleCheck for mishandling accounts in the past.

The full text of the report and information for the researcher and research firm can be obtained by emailing [email protected]  

About Bretton Woods & Michael Flores

Mr. Flores, President and CEO of Bretton Woods, Inc., is a subject matter expert in the area of financial institutions. He has over 30 years of financial institution experience in both hand-on experience and academic study. Mr. Flores specializes in the study of payment systems and process improvement and reengineering through enabling technologies. He has testified in Congress and spoken to industry groups and has authored several studies and articles for industry publications. Previously, Mr. Flores served as a faculty member with Pacific Coast Banking School in Seattle, Washington where he taught Technology's Role in Community Banking curriculum for bankers in the graduate school.   

About the NBPCA

The Network Branded Prepaid Card Association (NBPCA) is a non-profit, inter-industry trade association that seeks to educate, advocate, protect and promote on behalf of network branded prepaid debit cards and represents the common interests of the many types of companies who come together to deliver the wide variety of prepaid products. For additional information, visit www.NBPCA.org.

SOURCE Network Branded Prepaid Card Association

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