WASHINGTON (CBS DC) — Prepaid, reloadable cards have become commonplace in personal budgeting, with a new study finding that the often risky products have become more affordable for consumers.
A report released from the Pew Charitable Trusts suggests that general purpose and reloadable prepaid cards have become increasingly available to consumers despite the lax protection laws surrounding the transactions.
“More consumers are turning to prepaid cards as a convenient tool to control spending and fees,” said Susan Weinstock, who directs Pew’s safe checking research. “While prepaid cards offer many benefits to consumers, they are a relatively new product with little oversight. A lack of protections undermines prepaid cards as a safe and easy way to manage money.”
The study finds that large banks now offer the economical cards to consumers, with three of the 10 largest prepaid cards now being offered by such banks.
But both budget and fraud fears have not deterred buyers of the prepaid cards: “A Pew national survey, “Why Americans Use Prepaid Cards”, found that most customers’ primary motivation for using prepaid cards is to gain control over their finances, including avoiding credit card debt and overdrafts. Among those who have had a checking account, 2 in 5 have closed or lost an account because of overdraft fees. Pew’s research has found that prepaid cards currently have inconsistent overdraft practices,” reports the Pew Research Centers.
The Consumer Financial Protection Bureau (CFPB) issued a series of warnings regarding the prepaid cards.