The Sun Sentinel of South Florida reports that the prepaid card business is booming throughout the USA, because the credit crunch, and rising fees on checking accounts, are spurring consumers to find alternatives.
In 2008 American consumers loaded $12 billion on their prepaid cards. In 2010 that jumped to $42 billion, and this year – 2011 – will probably top $70 billion, according to the Mercator Advisory Group of Boston.
The major concern for consumers is keeping the fees low, as companies typically charge an activation fee, and charge another fee to reload the cards. The activation fee is generally about five bucks, the reloading fee is about $3, and ATM withdrawal fees are about $2. These fees can be reduced if you use direct deposit (of your paycheck).
Azfar Ali, 28, who co-owns a grocery store in Hollywood, Florida, has a credit card and a bank account, but he prefers prepaid cards for internet purchases so that information from his credit card or bank account can’t be stolen.
He loads his prepaid cards with small amounts for specific purchases. He transfers the money to the cards from his bank account, which carries no fee. If someone steals his card data, there’s little money to access, and he loses only the money loaded on the card.
“It’s a lot safer,” said Ali, who has been using the prepaid cards for a decade.
Sounds like a smart guy to me. I might start doing the same.