Prepaid debit cards have become increasingly popular among the unbanked as an alternative to traditional checking accounts. Despite criticisms that fees are too high, RushCard CEO Rob Rosenblatt sees a phenomenon whose time has come, reports Bankrate.
The average prepaid debit card customer
According to Rosenblatt, the Durbin Amendment and CARD Act have made it less attractive for banks to court customers who would be unlikely to maintain large balances. Both Bank of America and Chase have gone on record as favoring the top 20 percent of profitable customers, in no small part because free checking costs a bank about $350 per customer, per year on average.
This leaves the traditional prepaid debit card customer, those who are not adequately served by both the banking establishment and even the “loosely defined check-cashing system,” said Rosenblatt. Typically, such customers are single parents who come from urban environments in the inner city, areas where banks are sparse.
Prepaid debit card users tend to be those who have struggled to make ends meet in the down economy. Holding multiple jobs is not uncommon. Having access to money without ATM fees is a draw for such customers, as well as having the ability to spend anonymously via a secure account. Prepaid debit cards like RushCard also grant customers the power to pay bills and receive their paychecks fast via direct deposit.
Account maintenance fees will never be a part of RushCard, says Rosenblatt. Prepaid debit card businesses generally don’t have to maintain as much overhead as banks with ATMs, free checking and more. Thus, such companies don’t pass on as many fees to customers.
The power of persuasion, via RushGoals
While RushCard and other prepaid debit card issuers are not traditional banks, such companies are adopting some elements of the traditional banking experience. RushCard has RushGoals, a savings account-like reward program that enables customers to set a goal and funnel money into a sub-account. As savings goals are reached, small-dollar rewards are automatically added to the balance by RushCard.
Russell Simmons in a RushCard commercial
Durbin Amendment final text