NORTH LITTLE ROCK, Ark. -- Prepaid credit cards are growing in popularity among consumers fed up with bank fees, according to a report from CardRatings.com.
In 2011, consumers loaded about $460 billion onto prepaid cards, according to research from Mercator Advisory Group. And by 2016, the amount of money added to prepaid cards is expected to mushroom by almost 50% to nearly $685 billion.
The website report offers there four trends among prepaid cards to watch for in 2012.
Trend #1: An explosion of prepaid cards
For consumers, one big appeal of prepaid cards is that they can act as an alternative to banking institutions or as a supplement to a banking relationship. Thus, banks and financial entities issuing prepaid card issuers are going after the "unbanked" market, as well as disgruntled bank customers that complain about paying high checking account fees or getting nickel-and-dimed to death.
But in addition to financial entities, expect a slew of other entities--from retailers and airlines to utility companies and government agencies--to also issue prepaid cards of their own.
Trend #2: Prepaid cards go upscale, mainstream and global
In years past, prepaid cards had a reputation of being used exclusively by low- to moderate-income people, or those who aren't necessarily financially sophisticated. That's never fully been the case. But that perception nonetheless changed greatly in 2011, when American Express, which is known for having higher-end customers, stepped into the prepaid space.
Other signs also point to wider, mainstream acceptance of prepaid cards.
For one thing, American Express also launched a prepaid card with Target, the popular U.S. retailer. And, in 2011, MasterCard Inc. teamed up with Western Union to begin jointly offering reloadable prepaid cards bearing the MasterCard logo in countries internationally. The goal is to make it easier to make payments and send money around the world.
So in 2012, prepaid cards will likely continue to broaden their appeal, from a customer standpoint and geographically too.
Trend #3: Prepaid cards start to build credit rating
Consumers with "thin" credit or no credit at all typically use secured cards to try to establish their credit ratings. Likewise, those with severe credit problems in the past--such as bankruptcy or foreclosure--often turn to secured credit cards to help rebuild credit. In 2012, however, more prepaid card issuers will likely try to tap into these two groups of consumers by adding credit-enhancement features to prepaid cards.
Already, some prepaid cards do tout their credit-boosting tools. For example, on its website, the RushCard offers information about its RushPath to Credit feature.
The READYdebit Visa Prepaid Card also offers credit-building options, including a free monthly credit score tracker.
Trend #4: More celebrity branded cards
Celebrity endorsements can sometimes be golden for business--or they can become the kiss of debt. The latter scenario occurred with the disastrous rollout the Kardashian Kard, a prepaid debit card that featured reality TV sisters Kim, Khloe and Kourtney.
Despite the failure of the Kardashian Kard, look for banks and credit cards issuers to launch new prepaid cards in 2012 that feature high-profile individuals and entertainers of all backgrounds.
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