Thursday, September 13, 2012

People moving away from traditional banks, loading pre-paid debit cards instead

A significant percentage of Americans have abandoned traditional banking, with 8.2 percent of households managing finances without a bank, according to Census Bureau data compiled by the Federal Deposit Insurance Corp. That's up from 7.7 percent in 2009. Another 28.3 percent of households -- an increase from 25.6 percent -- are "underbanked," or still have a bank account, but step outside traditional banking systems by using payday loans or prepaid cards, Gary Fields and Maya Jackson-Randall of The Wall Street Journal report.

The unbanked and underbanked may be disproprotionately rural. Some who have forsaken banks are irritated over banking charges, including overdraft fees that cost customers $31.6 billion last year, and others are spurred by the financial crisis and a loss of confidence in traditional institutions.

The fastest growing type of nontraditional banking is prepaid debit cards offered by NetSpend and Green Dot Corp. Customers can buy cards at grocery stores and load money onto them to pay for "a wide variety of purchases -- just as they would do with a regular credit or debit card," Fields and Jackson-Randall report. But, customers must buy the card and pay a monthly fee to keep it. (Read more)

No comments: