News

Study: Prepaid cards mostly used short-term

August 13, 2012

A study by the Federal Reserve Bank of Philadelphia has found that consumers generally use a prepaid card for no more than six months, indicating that such cards are not being substituted for a permanent bank account.

An article posted by NASDAQ cited a number of other patterns in prepaid card use, as well:

• Cards used for direct deposit of pay and benefits were used nearly twice as long and 10 times as often as other prepaids.
• Prepaid cards were used most at fast food restaurants, gas stations and grocery stores.
• In general, cardholders paid $12 a month or less in card costs. Between 15 percent and 40 percent of the costs resulted from ATM surcharges.
• Between 30 percent and 50 percent of the funds on a prepaid card were withdrawn as a cash.
• Reloadable prepaids were most popular in Florida and western states, while direct deposit cards were used most in states of the South and Southeast.
• Use of general purpose reloadable cards, such as those available for purchase in stores, is concentrated in the West and Florida.
• Prepaid cards used for payroll purposes seem to be concentrated in the South and Southeast.

Data for the study was derived from 280 million transactions on three million cards used across the U.S. Data used came both from cards purchased by consumers at retail outlets and from those provided by employers for direct deposit of pay and benefits.

For more on this topic, visit the trends/statistics research center.