Using Prepaid Cards
The Bluebird prepaid card, offered by American Express, allows users to function as though they have a regular bank account, providing services through its mobile app such as direct deposit, online bill pay and check accounts.
According to the Federal Deposit Insurance Corporation, more than a quarter of U.S. households do not have traditional bank accounts (or they do, but still use an alternative financial service anyway).
Many people are also using general-purpose reloadable prepaid cards (they function like a debit card), which can be used at ATMs and for online purchases (these cards can be bought at not only banks, but also retail stores and online outlets. In 2013, they produced $1.6 billion in revenue, a 28.5 percent increase over 2011. And according to the Mercator Advisory Group, consumers loaded more than $6 billion onto these cards in 2012.
Due to their popularity and profit-making, the U.S. Postal Service has been considering selling its own brand of reloadable prepaid cards.
Mobile-phone providers are also getting in the act, offering prepaid cards with payment management apps (Sprint unveiled its Mobile Wallet last spring, while T-Mobile launched Mobile Money in February).
Before choosing a card, consider the following:
What does it cost to buy and use a card?
Are there fees for withdrawing and depositing money, paying bills, checking your balance or making direct deposits?
Is there a charge if you don’t use the card often enough?
Are there monthly and customer service fees?
Are there any other fees?
Increasing Checking Accounts
Americans are putting more cash into their checking accounts than at any other time within the past 25 years, a reflection of how U.S. households have strived to clean up their personal finances since the recession “ended”(it did?). Another factor is the lack of attractive investment alternatives.
In a recent survey by the bank consulting firm Moebs Services, Inc., the average balance in consumer checking accounts is about $1, 400 (it is?) during good economic times and when inflation is low.
The Moebs report (previously confidential for its clients), is a current indicator of how the economic worldwide downturn has changed consumer spending and saving habits.
According to Lee Ohanian, UCLA economist, there’s a wave of caution; Americans are paying down old debts, thinking twice about new borrowing and keeping cash on hand, just in case; “They think, ‘If I lose my job will I be out of work for two years?’ It’s scary.”
(Economist G. Michael Moebs, who heads the Moebs Services firm, has urged his clients to prepare for a big fund withdrawal whenever depositors decide that the economy is strong enough again, however).
Adopting Chip Cards
Visa and MasterCard are renewing a push to speed microchip adopting into U.S. credit and debit cards due to the impact of recent data breaches. The two companies maintain that this move away from the traditional black strip would eliminate a great amount of U.S. credit-card fraud (Canada, Mexico and most of Western Europe are already using chip cards). The process hasn’t been widely in use here because of costs and disputes over how network would operate (as of now, the disputes have largely been resolved).
Supporters say the chip cards are safer, because unlike the magnetic strip cards that transfer a credit-card number when they’re swiped, chip cards use a one-time code that moves between the chip and the retailer’s register. The result? A transfer of data that useless to anyone except the parties involved (and chip cards are extremely difficult to copy!).
Sources: “Prepaid cards take place of bank accounts”-by Orange County Register and Consumers Union-The (Sunday) Vindicator, March 9, 2014, “Consumers pad their checking accounts”-by Los Angeles Times-The (Sunday) Vindicator, July 27, 2014 and “MasterCard, Visa renew their push for chip cards”-by Associated Press-The Vindicator, May 24, 2014