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27/10/2009 -
Prepaid credit cards are known as an attractive option for unbanked consumers, immigrants, and others who cannot get approved for credit cards due to a poor credit score (or lack thereof). Yet thanks to the recession, prepaid cards are becoming more popular with two new consumer groups - college students and those fed up with banking fees.
"It's a stepping stone to getting traditional bank accounts, but what we've seen is that prepaid cards have developed increased functionality over time as a substitute," Rachel Schneider, innovation director at the Center for Financial Services Innovation, told the Washington Post.
As the credit crunch has worn on, many consumers are frustrated with high interest rates, slashed limits and steep overdraft fees. In addition, many people - cash-strapped college students especially - are making efforts to rely less on credit so they have more control over their finances. These are both situations in which prepaid cards can help.
As an increasing amount of consumers turn to prepaid cards - and recent studies from payment processing intelligence firm Mercator indicate that this is in fact the case - merchants are advised to ensure that their payment processing technology accepts prepaid cards in addition to credit and debit cards.
