Prepaid Debit Cards Have Gone Mainstream.

Prepaid debt cards  have stereotypically been viewed as a last result for people without a bank account.

What used to be considered a fringe financial product, has exploded and become a mainstream trend.

In fact, A 2013 Federal Reserve Board study found that these cards are the fastest growing form of non-cash-payment in the US.

Why so Popular?

The cards seem to be trending for three main reasons:

• Easily accessible

• Simple to use

• Great budgeting tool

Consumers purchase a card from a retail store or online, load money onto it and then simply use it as they would a regular debit card. Easy as that.  The card is not attached to a bank account or a line of credit. Once the available balance has been exhausted, the card cannot be used—making it extremely budget friendly.

For some, this is a good alternative to a standard checking account.  It is a great way to avoid incurring overdraft fees associated with most checking accounts and there are no minimum balance requirements.

“A lot of people use these cards to keep from going into debt and avoid overdraft fees,” said Susan Weinstock, director of Pew’s Consumer Banking Project. “They’ve been burned by their checking overdraft fees and they want a product that they can put money on, spend it down and don’t have to worry that they’re going to spend more than they have.”

This form of purchasing power is especially popular among millennials.

“Along with an aversion to credit, millennials have a real willingness to embrace non-traditional financial products and stay away from banks altogether,” said Matt Schulz, senior industry analyst for

Not All Prepaid Cards are Created Equal:

When considering whether or not to use a prepaid debit card, there are several things to consider, but the most important and costly factor is the presences of hidden fees. Some cards carry very high, unexpected fees.

“Not all prepaid cards are created equal,” said Consumer Reports’ senior editor Jeff Blyskal. “There are differences in pricing and fees, and in the transparency of the terms and conditions for when you use the card.”

As the market has grown more competitive most card issuers have reduced the number of fees and gone to a monthly fee in lieu of transactional fees. There also is the option of loading money on the card via direct deposit which can further eliminate fees.

How Cards Stack Up:

Consumer Reports reviewed 20 prepaid cards and rated them in the following areas:

Value: how much they cost to use
Convenience: how widely the card network is accepted, availability of in-network ATMs and bill pay
Safety: the money loaded on the card is protected by FDIC insurance
Transparency: how well fees are disclosed

American Express-Walmart Bluebird card was the top rated prepaid debit card. It does not charge a monthly fee, offers a variety of services such as bill pay, and allows free access to in-network ATMS. Chase Liquid Visa and Green Dot Prepaid Visa came in a close second and third.

On the other end of the spectrum was NetSpend. It was the lowest rated card falling short in the areas of value and convenience.

Prepaid debit cards are a viable financial option for some and can offer several conveniences. There are also drawbacks. Whether or not you choose to go with this trend, it looks like it is here to stay.

Consumer Expert Denise Hill

Denise is currently a writer and editor for a federal agency in Washington, DC. She is an open-minded free spirit always ready for new adventures. She enjoys traveling and relishes being exposed to alternate points of view. Faith, family and finances are the core of her value system. She follows her own path and marches to her own beat. She is a dream chaser and with her husband and best friend by her side, she plans to take over the world.