News

GPRs less costly than DDAs as primary payment tool

November 13, 2013

The majority of consumers who use a prepaid debit card to manage their finances do so for less than $7.50 per month, which represents a cost savings over a basic checking account, according to the fourth annual "Analysis of General Purpose Reloadable Cards" by Bretton Woods Inc. The study looked at all fees, including those for in- and out-of-network ATM withdrawals and in-network ATM balance inquiries.

"The three-year trend shows that the costs of basic checking accounts are increasing while the costs to use general purpose reloadable cards, also known as prepaid debit cards, are decreasing," said Michael Flores, president of Bretton Woods Inc. and author of the report. "The 2013 analysis is able to pinpoint with more accuracy what it costs the majority of consumers to use their cards and revealed that high fees incurred by consumers are from outlier cards only and are completely avoidable."

Study data gathered from program managers and bank issuers revealed that:

• direct deposit basic checking accounts cost more than twice, on average, than direct deposit GPR cards while non-direct deposit checking accounts are 1.5 times more expensive;
• nearly 60 percent of banks now offer GPR cards;
• users of reloadable prepaid cards without direct deposit spend from $58–$333.75 annually;
• users of reloadable prepaid cards with direct deposit incur costs of $58–$263.95 annually;
• consumers that use basic checking accounts incur costs of $263–$473 annually; and
• users of cash incur costs of $41.42–$108 annually.

"While similar to checking accounts, prepaid cards fill a critical financial services need for a new generation that prefers the consumer friendly technology, as well as consumers with limited access to checking accounts," said Kirsten Trusko, president and executive director of the Network Branded Prepaid Card Association. "The trends are unmistakable. General purpose reloadable prepaid cards are serving the needs of Gen Y and the underbanked, and also gaining a foothold with traditionally banked consumers — fueled by the number of banks and credit unions now offering GPR cards."

The comparative analysis was conducted by Flores using independent, third-party sources along with input from prepaid card providers to verify fees and typical transaction patterns. The study compared the costs of FDIC-insured checking accounts from fourteen banks representing 43 percent of the total deposits in the U.S. with the costs of the largest FDIC-insured reloadable prepaid card programs.

Download the full report.

Read more about trends and statistics.