Prepaid credit cards are a fast-growing trend for consumers who are trying to avoid new bank fees, according to a recent study.
Mercator Advisory Group recently released new research that shows consumers loaded approximately $460 billion onto prepaid cards in the past year. That amount is expected to reach nearly $685 billion in the next four years.
In the past, prepaid cards were generally tailored to the “unbanked” market, CardRatings.com reports, but banks and financial entities have recently started targeting consumers that are fed up with high checking account fees and other banking service charges.
Retailers such as Target are also beginning to issue prepaid cards of their own.
Prepaid card issuers have also started marketing their products by offering credit-enhancement features.
The prepaid RushCard promises its customers that after using its product over time, credit reporting agencies can use his or her transaction history to create a positive credit file, according to CardRatings.com.
Card issuers are also using celebrities to help promote prepaid cards
Rapper Lil Wayne helped Discover launch a new prepaid card in November and New York Yankees baseball star Alex Rodriguez will be the face of the DYNASTY Prepaid Visa RushCard, CardRatings.com reports.
Sen. Robert Menendez (D-N.J.) recently introduced legislation in order to protect prepaid card consumers from hidden fees.
“This season, its hidden fees that are making for a Blue Christmas,” Menendez said. “Unsuspecting consumers are finding out the hard way that prepaid cards often give you much less than the dollar amount you load onto them thanks to unnecessary fees. We need to ensure that families who rely on prepaid cards are not surprised by hidden charges."