Surveys: Consumers See Value in Prepaid Cards; Banks’ Overdraft Fees Increase (April 7, 2014)
A majority of Americans view the features of reloadable prepaid cards favorably as financial institutions’ fees for checking account overdrafts have started to creep up, according to two recently released surveys.
More than 60 percent of all respondents said prepaid cards are good for consumers, and 80 percent of those surveyed who either have purchased or used a prepaid card said the products are good for consumers, according to a survey released late last month by Ipsos Public Affairs on behalf of the American Bankers Association. The survey of more than 1,000 adults was conducted in November 2013.
The prepaid card features most consumers ranked “good” include: network branded prepaid cards’ ability to be used anywhere that brand is accepted (70 percent); the flexibility to shop online where checks and cash generally are not accepted (68 percent); and a fixed spending limit that prevents users from spending more than is on the card (69 percent).
What’s more, 65 percent of respondents said prepaid cards are a good option to receive and spend money, 64 percent said the cards would serve as a good “first account” for teens and college students, and 62 percent said prepaid cards are an attractive option for consumers who don’t qualify for a traditional checking account.
A separate report released last week indicates that financial institutions’ average overdraft fees on checking accounts have increased to $30 in 2013 compared with $27 in 2010. In that same period, however, average overdrafts per checking account per year decreased from 8.2 to 7.1, according to Moebs Services, a Lake Bluff, Ill.-based economic research firm. Despite the fee increase, the drop in average number of overdrafts has kept revenue from overdraft fees relatively flat at about $32 billion a year between 2011 and 2013.
“The decrease in net pay from automatic government budget increases in Social Security tax on Jan. 1, 2013, the government shutdown in October, medical coverage snafus in the fall, and very bad weather prompted the consumer in 2013 to be more aware of overdraft use,” said Michael Moebs, economist and CEO at Moebs Services.