More ‘underbanked’ Americans utilize prepaid credit cards

Written on June 21, 2010 – 11:44 pm | by Alicia Ross

Underbanked Americans leaning towards prepaid cards as opposed to traditional lines of credit

Given the growing number of underbanked individuals – those that turn away from traditional banking products such as debit and credit cards – more banks are considering tapping into more alternative products, such as prepaid cards, in an effort to reach out to this demographic. Current figures reveal that 43 million Americans are considered underbanked, according to market research and consulting firm MarketsandMarkets.

Statistics show that the unbanked and underbanked spend a combined $10.4 billion on an annual basis on nearly 324 million alternate financial services, including payday lending, check-cashing facilities, non-bank money orders, refund-anticipation loans and rent-to-own agreements. However, prepaid cards topped the list as the most utilized by, and potentially best product banks can offer to, underbanked Americans, generating $290 billion in 2009. This is especially true for prepaid card issuers that report to credit bureaus, allowing consumers to build their credit scores.

The M&M estimates that the market for prepaid cards will swell to $791 billion by 2014.

As banks attempt to benefit from this growth, they are providing more services to consumers that are hesitant to use conventional banking products. While most institutions attempt to upsell their products to underbanked clients that hold basic checking or savings accounts, more financial institutions have established small branches at kiosks and retail stores to lure potential clients. Some banks have opened new offices near their targeted area in an effort to employ marketing campaigns and financial education to prospective individuals.

Regardless of whether individuals shy away from traditional financial instruments or utilize a number of money products, it’s important for Americans to understand the tools and services they are using to maintain and strengthen their financial health.

Credit Cards Offers Online