Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.
Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Government Issued Prepaid Cards: Efficient Cash Access and Distribution.
Prepaid Cards: A Business Solution to a Social Issue
- On Oct. 1, 2020, the OCC adopted a new set of standards such that credit card lending no longer benefits lenders in their Community Reinvestment Act responsibilities.
- Prior to then, banks were incentivised to offer $100 credit extensions on cards carrying a 30% interest rate as long as the borrower lived in the area and was low-income.
- Low-cost bank accounts, such as those offered by BofA, Chase, Wells Fargo, Key Bank and US Bank are options embraced by more than 600,000 new accounts in 2017.
- For instant needs, the comparative cost and effectiveness of prepaid cards far outweigh the benefits of returning to checks.
- Associated costs of paper, risk of theft, and consumer inconvenience are too great to return to paper check.
- Emergency relief programs, such as those directed by the CARES Act, are further examples of the utility of prepaid.
Prepaid cards played a significant role in distributing CARES Act funds to 3.6 million Americans, but the payment form extends deep into many government benefit programs.
Ten benefit programs carried $136.2 billion in prepaid loads during 2019, but only incurred $152.7 million in costs among all government distribution channels. For those in need, prepaid cards provide quick access to funds and a reliable, safe way to receive cash value.