Do Prepaid Cards Spell the End of Cash?
Did you know that March 1, 2013, marked “the end of cash” for the U.S. government? Starting that day, payments (such as Social Security, Supplemental Security Income, veterans’ benefits and retirement benefits) to federal employees began to be electronically direct-deposited. Recipients can now opt to have the money sent to a financial institution account of their choice, or they can use a government-issued prepaid card, called the Direct Express Card, to access their money.
The rise of prepaid cards may very well decrease consumers’ reliance on cash. Indeed, prepaid cards are becoming so popular that consumers are finding more ways to use them to improve their financial lives. The latest trend has been for parents to use prepaid cards to pay their kids’ allowance.
A 2011 report by the Federal Deposit Insurance Corp. (FDIC) found more than 20 percent of U.S. households operate almost entirely in cash. These families rely on alternative financial services, such as payday loans or check cashing, for their financial services. To them, prepaid cards that tout low fees and FDIC protection will be a more attractive alternative to checking accounts or credit cards.
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