Should the 'Already Banked' Consider Prepaid Debit Cards?

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Kaiku Card Between the Great Recession and the consumer-oriented banking reforms that followed, it's gotten significantly harder for banks to earn big profits from consumer credit cards. And that's given them all the incentive they need to hunt down new products with which they can skim profits off of your purchases -- among them, prepaid cards. And they're not just for the "unbanked" anymore.

A few months ago, as you may recall, JPMorganChase (JPM) began touting a new prepaid debit card called Chase Liquid, with low fees of about $5 a month. The bank said its card is intended to introduce unbanked customers to the Chase brand, and give them a convenient way to pay with plastic.

Chase is far from the only bank capitalizing on this idea. Wells Fargo (WFC), Bank of America (BAC), American Express (AXP) -- these days, almost any big bank you've ever heard of is hawking a prepaid product of some sort. And now, even banks you've never heard of are, too.

Just this week, California-based card issuer Kaiku Finance floated something called a "Kaiku Card." The key difference is that Kaiku says it's not so much aiming to recruit unbanked customers to big banking's brand, but rather hoping regular customers will add another card to their wallet.

A New Name in the Card Game

Kaiku wants people like you and me, who have bank accounts, credit card accounts, and wallets already stuffed with more plastic than paper, to wedge the Kaiku Card in there as well.

Kaiku argues that its prepaid card "can be of value ... to all types of consumers." Unlike a credit card, a prepaid card doesn't rack up debt, charge interest, or hit you with late fees. It's simpler than a checkbook to use, and entails none of the fees banks charge for maintaining a checking account.

Apparently, these are desirable attributes to consumers, whose prepaid card usage rose by 20% in 2011, and who are expected to spend close to $600 billion through prepaid cards in 2013.

What's in It for You?

Now here's the catch: While they act a lot like debit cards, prepaids are actually a different plastic animal. Not linked to a checking account, they're not technically debit cards -- and so not subject to the cap on interchange fees imposed last summer. Indeed, experts say that prepaids today are still "largely unregulated at the federal level."

The Consumer Financial Protection Bureau is considering regulations to help prevent abuses in the market. One day soon, it may be just as safe to put a prepaid card in your wallet as a standard issue debit or credit card ... if you can fit it in.



Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of JPMorgan Chase, Wells Fargo, and Bank of America. Motley Fool newsletter services have recommended buying shares of Visa and Wells Fargo, as well as writing a covered strangle position in American Express.



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ChiefSweetums

http://kaikufinance.quora.com/KAIKU-SLAMS-SINGLE-MOTHER

January 01 2014 at 6:34 PM Report abuse rate up rate down Reply
MSSEXXCES000

THIS IMP PERSON IS A MAGGOT BRAIN MAKING DUMB ASS COMMENTS AND DOSEN'T KNOW THAT A PRE PAID DEBIT CARD HAS NOTHING TO DO WITH BEING [POOR IT'S YOUR OWN MONEY PUT ON A PLASTIC CARD THATS A LOT SAFER THAN CARRYING CASH . GO EDUCATE YOURSELF BEFORE YOU START YACKING CRACK BABY

November 13 2012 at 12:13 AM Report abuse rate up rate down Reply
ilm9p

A pre-paid debit card? You mean like the EBT card that all the scum on welfare get? The one that's re-loaded every month with upwards of $1100.00 in free money for doing absolutely nothing? Oh but I wouldn't be eligible for that, I work for a living and opted to breed responsibly.

Yep, welfare, that's the way to go! There's no limit to what those dirty animals get for free. They sit around in the air conditioned comfort of their free Section 8 housing, watching free Cable TV, getting free health insurance, free utilities, free everything. Then they send their spawn to school to get free breakfast, free lunch, and then bilk the teachers out of free school supplies because they're "disadvantaged". Bottom line, all the rest of us hard working stiffs have to tighten our belts, this scum gets it all, and more, for free.

August 29 2012 at 3:01 PM Report abuse rate up rate down Reply
1 reply to ilm9p's comment
arnwhit2

Hmm... Maybe you need a little education ilm9p. They are talking about a card that a person deposits money onto. Then they can use that money as anyone else uses a credit or debit card. It's not "Free" or coming from the government. It's like a debit card without being linked to a bank account. Do some research before you burn the world with your fiery tongue. LOL

August 31 2012 at 11:10 PM Report abuse rate up rate down Reply