Prepaid Cards or Traditional Checking Accounts: What is the Better Choice?

May 9, 2013

Prepaid Cards or Traditional Checking Accounts: What is the Better Choice?


Javelin Analyzes Prepaid Card Market Momentum and Opportunity for Issuers

San Francisco, CA, May 8, 2013. The dynamics of the card-issuing business and those of the banking industry have changed dramatically in recent years as an array of economic, regulatory, and governmental factors and initiatives have combined to drive expansion in the use of prepaid products. Today, Javelin Strategy & Research released the firm's Checking vs. Prepaid: Threat or Opportunity? report, which evaluates selected prepaid cards in the market today to determine how fees for prepaid products compare to those of basic checking accounts, as well as differences between bank and non-bank prepaid products.

From an estimated $150 billion this year, prepaid purchase volume is expected to grow by almost $45 billion over the next five years. Over the last three years, consumer ownership of prepaid cards climbed rapidly. Over 13% of US adults now own a prepaid card.

Bank prepaid products are generally a lower fee option for consumers than basic checking. In a baseline scenario comparison combining monthly fees and ATM access charges, the top retail bank checking account charges an average of $8.84 per month, while a bank prepaid card is just $6.89 a month.

“Banks may find the optimal prepaid customer within their own walls as existing, underperforming checking account holders,” said Aleia Van Dyke, Industry Analyst – Payments at Javelin Strategy & Research. “Despite the newer opt-in rules, overdraft behavior is most likely to make checking accounts too expensive for some consumers, and prepaid options enable banks to retain customers in a manner that is more satisfactory and cost-effective for both parties.”

Javelin Strategy & Research’s Checking vs. Prepaid: Threat or Opportunity? report evaluates factors encouraging the expansion of prepaid products in the U.S. market, today’s key providers of prepaid products, and the positioning of bank prepaid products with key demographic segments. It is based on three online surveys of more than 11,000 consumers and an extensive review of popular bank-supported prepaid and non-bank prepaid cards. The report contains 38 pages and 25 graphs.

Javelin reviewed product and fee information from the following prepaid products: BB&T MoneyAccount, Chase Liquid, PNC SmartAccess, Regions Financial Now Card, U.S. Bank Convenient Cash Card, AccountNow Gold Card, Bluebird by American Express and Walmart, Kaiku Visa Prepaid Card, NetSpend FeeAdvantage Plan Prepaid Card, and Plastyc UPside Visa Prepaid Card.

Learn More: Checking vs. Prepaid: Threat or Opportunity?

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About Javelin Strategy & Research
Javelin Strategy & Research, a division of Greenwich Associates, provides strategic insights into customer transactions, increasing sustainable profits for financial institutions, government, payments companies, merchants and other technology providers. Javelin’s independent insights result from a uniquely rigorous three-dimensional research process that assesses customers, providers, and the transactions ecosystem.

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