A Desire To Improve Credit Score
WASHINGTON-A majority of consumers, 56%, selected "improving my credit score" as the personal finance area in which they needed the most help according to the National Foundation for Credit Counseling's Financial Literacy Opinion Index, which may give credit unions a reason to offer seminars on understanding and improving credit scores.
Supporting the findings of the monthly survey is the data from the NFCC's recent annual Financial Literacy Survey, which found the majority of adults have not ordered their credit report in the past 12 months. Other areas of interest: 23% admitted they need help "controlling their spending," but only 11% of those weighing in selected "knowing how to save money" as their main concern. For info: www.nfcc.org
Prepaid Card Market Growing Rapidly
WASHINGTON-The market for prepaid debit cards is large and growing fast, according to recent research by the Pew Health Group.
In 2009, $28.6 billion was placed onto reloadable prepaid cards in the United States. By 2013, that figure is expected to reach $201.9 billion, Pew said.
In November 2011, the Pew Health Group's Financial Security Portfolio conducted focus groups with consumers who purchase and use prepaid debit cards to understand their motivations.
Most participants in the focus groups have a checking account. Of these, many have previously incurred unanticipated fees on their account and were not happy about such an outcome. They prefer the $2 and $3 fees from prepaid cards over the potential of a $35 overdraft fee on their checking accounts.
* "I don't like the fees on prepaid debit cards. ... It costs to load (them). It costs $3.95. I don't like that I pay the $3.95, but I'd prefer to pay the $3.95 than have to deal with the things that I know that people go through with their checking accounts... If we had to, I'd take the $3.95 any day over the $35 overdrafting or for some other fees." -Female participant, Chicago
* "I think (prepaid card fees) are fair because they're upfront. I'm thinking in contrast to a checking account. I think the ambiance and the idea of the marketing behind a checking account is they're your friend; they're your hometown bank. You can depend on them... really, they're just lulling you into the sense of comfort because they're going to whammy you with fees on the backside. Whereas prepaid debit cards, they're very upfront. This is the cost of the card; this is the cost for the services. It's up to you at that point." -Female participant, Houston
* "Compared to my situation, I went through a lot of late fees with the credit cards, extra fees with the checking accounts. I was paying monthly between $35 to $50 in fees compared to $3.99 that I pay for a maintenance fee to get a card." -Male participant, Houston
Another prime motivation: prepaid cards allow these consumers to limit their spending and avoid incurring unwanted debt.
* "(The card) is $9.95 per month for unlimited charges on it or a dollar per charge on the card. I know exactly how much I'm going to have to pay in fees upfront. I know exactly how much money is available on the card because I put it on the card. ... It's just easier to track and manage." -Female participant, Houston
* "You're not overdrafting, and what's on there is what's actually on there. If you have a prepaid card with $500, it's a $500 limit. There's $500 on it. If you have a credit card with $500, one, you don't actually have $500. You just have this imaginary $500 that you have to pay back." -Female participant, Chicago
* "One of the things that I did was I got one of those debit cards, and I know that whatever is on it is the only thing that I can spend. I'm not using my real credit card where I can spend and pay a little bit a month. I know I'm only allowed to use what is on that card, and that actually limits me as well." -Female participant, Houston
For info: www.pewhealth.org