Consumer Payment Card News

Prepaid Cards

As the “pay later” market evolved in the 1980s and the “pay now” market evolved in the 1990s, the emerging market of the 2000s is “pay before.” While the developed credit card and debit card market account for trillions of transaction dollars annually, the new prepaid card market is expected to top $240 billion globally this year, and may hit $500 billion by the year 2007. Three recent surveys, released this week, show how quickly Americans have embraced prepaid cards, especially gift cards. According First Data’s ValueLink research, 45% of the adult population purchased a gift card in the previous 12 months versus just 23% in a similar survey conducted in August 2002. The study also found that 59% of consumers reported purchasing and/or receiving a gift card in the past year, a 22% increase over 2002 findings. Only 8% of consumers reported that they purchased a card for their own use during the previous year versus 12% in 2002. Comdata’s Stored Value Systems says its poll shows that 87% of adults who have given or received gift cards plan to buy between four and 15 retail gift cards this holiday season with an average amount of $38 per card. SVS says “heavy” gift card users (those who purchased eleven or more cards in the last year) are expected to buy an average of $332. The primary reason expressed for purchasing a gift card is the desire for the recipient to select what they want (44%), followed by 35% who just didn’t know what to get for someone or didn’t know preferences in color, size, etc. The sixth annual Coinstar survey shows that 36% of consumers buy prepaid cards to avoid credit card interest charges and that 35% say it helps then avoid accumulating credit card debt. More than one-third said it helps control spending, while 14% said they do not have a credit card. About one-third say prepaid cards are good to give as gifts; and 29% say they are especially good to give to kids.

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