Prepaid debits cards are a fast-growing industry.
In 2009, Americans loaded more than $25 billion onto them. And, in 2013, that number is set to explode -- to more than $200 billion.
The reason is simple: convenience.
Buy a prepaid debit card at a convenience store or online, and you can take out cash at any ATM -- and there's no bank account attached.
That means, no overdraft fees or out-of-network ATM fees. And, according to a new study by the Pew Research Center , prepaid cards can be cheaper for some Americans – especially, if you overdraw often.
Customers who use prepaid cards say they help them stay on a budget since you can only spend as much as you load onto the card. They also say prepaid cards help them avoid racking up debt like they can with credit cards.
And, if you're a parent who wants to give your kids money without giving them access to your bank account, this could work for you.
But, if you do decide to get a prepaid card, be careful. The Pew study warns that there are some serious risks .
- First, there's no federal supervision of this industry, making it ripe for predatory lenders looking to make a buck.
- Plus, fees for individual cards vary so much that comparison shopping to find which is right for you, can seem impossible.
- And there's often no guarantee that your funds are federally insured when you put them onto a prepaid card. They're sold by companies like Green Dot and NetSpend , and not by banks, so the funds are not necessarily insured the same way.
The Consumer Financial Protection Bureau is getting ready to put out some rules to guide this industry, Pew reports. It's a move they think is necessary to protect consumers who use prepaid cards. When they do, we'll bring you that information.