Prepaid credit cards rise in popularity, report shows
By Credit.com staff
Citing the results of the survey, 42 percent of participants reported receiving an network branded, or open-loop, gift card, while 67 percent received a store-specific prepaid card.
"That's a big increase since our 2005 Cardbeat survey of the gift card market, when only 26 percent of shoppers received open-loop cards," Cardbeat editor Nancy Stahl said.
The results were somewhat surprising to researchers as more prepaid credit card issuers are shying away from gift cards, which are included under the provisions of the Credit Card Accountability Responsibility and Disclosure Act. Under the CARD Act, fees and expiration will be more heavily regulated, unlike general-purpose prepaid cards which are not included under the same protections.
"General-purpose stored-value cards have the potential to replace traveler's and payroll deposit checks in the same way that gift cards replaced paper gift certificates, but fewer than 10 percent of our consumers have used a prepaid travel or payroll card."
The report also determined that, though general-purpose prepaid cards usage is low, more parents would be in favor of purchasing these lines of credit for their teenagers. One-third are in favor of securing a card for their child while another third said they would consider it.
Prepaid credit cards may be a good educational tool for young adults trying to budget their finances or develop strong spending habits. These lines of credit would also prevent parents from having to co-sign for a traditional credit card, thereby putting their credit score in jeopardy.
