The Pinch: Prepaid debit cards offer option for those without bank accounts

For people without a bank account, prepaid debit cards are a great alternative to paying for money orders or check-cashing services, said Ron Hynes, the executive vice president of Global Prepaid Solutions for MasterCard.


Twelve percent of households in Georgia don’t have a bank account, according to the FDIC’s 2009 National Survey of Unbanked and Underbanked Households. The statewide rate surpasses the nationwide figure of 7.7 percent.

There are several reasons people don’t have bank accounts, Hynes said. Some feel that banking is too expensive. Others can’t get an account because they have a poor record with Chex Systems Inc., which gives banks background on people’s banking habits.

A prepaid debit card might be the only electronic payment method available to those consumers. It provides “mainstream financial services to folks that don’t have access to them today,” he said.

People without an account could pay less in transactions costs if they used prepaid debit cards, said a study by Bretton Woods Inc. The average person who relies on money orders and check-cashing companies spends $9 to $48 a month, compared with $8 to $20 for prepaid-card users.

To cash a paycheck, some businesses charge 1-3 percent of the face value of the check, Hynes said.

“It also gives the security of not having to have all of your money in cash either in your pocket or in your house or apartment,” he said. “And having the security of having it stored somewhere safely with a lot of the protections that come with any bank account.”

If MasterCard’s prepaid card is lost or stolen, all the money is protected. Most of MasterCard’s prepaid products offer FDIC insurance.

Consumers can buy prepaid debit cards at retailers or directly from payment-card companies. Prepaid debit cards enable users to make purchases anywhere credit or debit cards are accepted. The cards can be used to withdraw cash at ATMs, though a fee might apply.

Prepaid cardholders can load money onto their card by depositing cash or paychecks at retailers or through direct deposit. Prepaid cards give the ability to shop online or use other financial tools. Though no interest rates apply to prepaid cards, most have monthly or other fees.

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