Recently in Prepaid Debit Cards Category

The State Department of Revenue Services said Monday it will not send you a tax refund check, instead, people who overpaid will now be issued a Chase Bank debit card if they do not accept direct deposit.

Tax refunds in excess of $10,000, or for people who have off shore bank accounts, will still be issued as checks, as will refunds filed on behalf of the deceased or for previous tax years.

The DRS' decision to stop sending out checks follows similar decisions by the state Department of Labor and the Department of Social Services to issue debit cards for unemployment insurance and food stamps respectively.

While the state attempted to limit the number of fees Chase could take for servicing the cards, people could ring up charges if they use the wrong ATMs or fail to use all the cash immediately.

The cards must be activated and will require refund recipients to provide their Social Security numbers to Chase as part of that process. You will also get a personal identification number for the card.

Montvale, N.J., Jan. 26, 2012 -- The recent launch of several new prepaid debit cards has brought fresh attention to prepaid cards. Unlike credit cards, prepaid debit cards allow consumers to manage their money, control spending, and avoid interest charges and credit card debt.

Both Federal and State governments are using prepaid cards to distribute government benefits including unemployment compensation and Social Security. According to a 2011 Hudson Institute study, The Move to Digital Payment: When the Check is No Longer in the Mail, US Treasury estimates that moving all Social Security payments to direct deposit or prepaid cards would save taxpayers $125 million a year.

"Not only is there is a cultural shift happening in the way businesses and governments manage their payments, but also in the way people manage their finances. Many young people today have never set foot in a bank or written a check, while others are choosing prepaid cards because they either can't qualify for a bank account or don't want to pay rising checking account fees," said Kirsten Trusko, President & Executive Director of the Network Branded Prepaid Card Association (NBPCA).

Additionally, many prepaid cards offer savings programs, which help consumers save money. As noted in New America Foundation's policy paper, Beyond Barriers: Designing Savings Accounts for Lower-Income Consumers, "consumers using the savings pocket of a prepaid card reported that customers who set up defaults or automatic transfers into their savings accounts had more success accumulating savings." The policy paper further recommended "to help bridge the gap between where small-dollar savings products are offered and where consumers are located . . . the small-dollar savings products could be sold at retail outlets through branchless banking or as a reloadable prepaid product."

Stacked up against low-balance checking accounts, the yearly cost of using a prepaid debit card is less. Prepaid debit cards, like checking accounts, offer different fee structures to meet each individual's needs. Most card providers will waive monthly fees if consumers either get their wages or benefits directly deposited to the cards or maintain higher monthly balances, similar to checking account options offered by banks. Moreover, prepaid cardholders can avoid paying ATM fees by using in-network ATMs, just like debit card users, or by requesting cash back with purchases at retailers, just like debit card users.

A Bretton Woods March 2011 study comparing the cost of using cash, low-balance checking accounts and prepaid cards concluded:

• Reloadable prepaid card users' costs range from $76 to $261.35 annually if they use direct deposit and without direct deposit yearly fees range from $184.35 to $380.15.
  
• Bank customers pay from $218 to $284 annually for a basic checking account.
  
• Consumers who pay to cash checks and live a cash-based lifestyle pay $140 to more than $720 annually.

Prepaid cards are viable alternatives to checking accounts, are issued by highly regulated banks and offer a variety of consumer protections including FDIC insurance on a pass-through basis and the card brand's zero liability protections against lost, stolen or fraudulent charges. Additionally, the majority of general purpose reloadable card issuers voluntarily provide Regulation E coverage as it applies to payroll cards. Prepaid card issuers comply with all applicable fee disclosure requirements and consumers also have access to card and fee data both online, or via a toll-free telephone call.

"It's important to remember that not everyone qualifies for free checking and the basic checking account services that many of us take for granted. Prepaid cards often compare favorably with the potential costs of low balance checking accounts," continued Trusko. "Prepaid cards provide an option to consumers who might otherwise be dependent on an insecure and inefficient cash-and-carry lifestyle."

A significant portion of the American population cannot pass the processes used by banks, such as ChexSystems, which qualify consumers for a bank account. According to the 2009 FDIC National Survey of Unbanked and Underbanked Households an estimated 7.7% of US households, about 9 million, are unbanked and an estimated 17.9% of US households, about 21 million, are underbanked. Approximately 80% of all banks and credit unions nationwide are members of, or use, ChexSystems. Prepaid card fills a void in the financial services marketplace for these individuals, enabling them to access the financial mainstream.

According to a KPMG study, today's financially underserved market who may choose the prepaid debit card option include recent graduates, hourly workers, immigrants and higher income workers who may have lost jobs, homes to foreclosures or filed bankruptcy due to the recession and can no longer qualify for checking accounts. For those who need or want another option in handling their finances, prepaid cards allow individuals to participate in our electronic, card-based marketplace with the safety, convenience and security of a bank debit card without the discrimination, risk and cost of carrying cash.

About the NBPCA

The Network Branded Prepaid Card Association (NBPCA) is a non-profit, inter-industry trade association that seeks to educate, advocate, protect and promote on behalf of network branded prepaid debit cards and represents the common interests of the many types of companies who come together to deliver the wide variety of prepaid products. For additional information, visit www.NBPCA.org .

CINCINNATI--(BUSINESS WIRE)--RushCard announced today a new feature that allows many of its cardholders to get access to their money even faster. Members who have their paychecks and certain other payments directly deposited on their RushCard may be able to receive their funds up to two days early.

"At RushCard we are committed to helping our customers realize their financial goals"

"In an effort to keep our customers out of pay day loans and other high priced lending products, we're enabling many of our customers to access their direct deposit up to two days early," said RushCard founder, Russell Simmons. "Our members can now enjoy increased flexibility and peace of mind knowing that RushCard will help them meet any financial challenge."

As part of RushCard's robust suite of money-saving solutions that include comprehensive budgeting tools, online bill pay, money transfer services, and many other valuable services like prescription discount plans, the new early access feature helps cardholders to take greater control of their finances.

"At RushCard we are committed to helping our customers realize their financial goals," said RushCard CEO, Rob Rosenblatt. "Underbanked and unbanked consumers need innovative financial products and services to help them achieve their financial objectives."

Recently, RushCard announced RushGoals, a new tool and a cashback reward that helps hard-working members and underserved customers achieve their financial goals. In each month in which a Cardholder maintains an average daily balance of $500 or more across their RushGoals sub-accounts, the Cardholder will be rewarded with $2 that will be applied toward their RushCard fees.

To learn more about the Prepaid Visa RushCard and its financial empowerment program, visit www.RushCard.com.

About UniRush LLC

Headquartered in Cincinnati and New York City, UniRush LLC provides members with access to services that enable them to achieve their personal and financial Goals. The RushCard offers the more than 60 million Americans without access to a traditional banking relationship an array of basic financial services via the Prepaid Visa RushCard. Benefits of the program include direct deposit, card-to-card funds transfers, online budgeting tools, the ability to withdraw funds at more than 850,000 ATMs globally, the ability to use the card wherever Visa debit cards are accepted, and a suite of health products to help those underserved by the insurance industry. RushCard is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used wherever Visa debit cards are accepted. The Bancorp Bank; Member FDIC. For more information about UniRush and RushCard visit www.rushcard.com or find us at Facebook.com/Rushcard or on Twitter @RushCard.

If you follow this blog with any regularity, you know I've been writing a lot lately about prepaid debit cards, which are increasingly becoming a challenger to traditional checking accounts.

I caught up with RushCard CEO Rob Rosenblatt this week to give him a chance to respond to my criticism of its new RushGoals savings program and what I consider high fees on the company's prepaid cards. Here's what he had to say.

Who typically uses prepaid debit cards? Give me an overview of a typical user profile.

To begin with, the user base right now is extremely broad and it is growing, in large part because of -- and by the way, I come from the banking community, so I'm well aware of the impacts of the Durbin amendment and the CARD Act before it -- the combination of those two pieces of legislation have made the banking system ill-suited to serve those customers that typically don't maintain large balances with them.

In fact, there were two quotes I wanted to cite for you. The CEO of Bank of America Brian Moynihan has said that they're going to be focusing on the top 20 percent of the most profitable customers and getting rid of the unprofitable ones. And Jamie Dimon, who's CEO of the bank I just left, Chase, mentioned that it cost $350 on average to provide a free checking account each year.

If you think about the overhead associated with maintaining a large branch and ATM system with multi-hundred-million-dollar advertising budgets, every bank in America is having to get more focused.

We define our customer set as anybody for whom the banking industry and more loosely defined check-cashing system don't adequately serve them. Those numbers are somewhere between 60 million and 70 million customers. And typically, they live in urban environments in inner-city areas, where you may see a bank branch once in a while, but you don't see many of them.

I live and work in New York City, and my son is a baseball player, and he practices on some Saturdays about a mile away from Yankee Stadium and it's a little bit of a dangerous neighborhood where he plays, and I have to drive him. In the course of that drive, we sometimes pull over to go get him something to drink, something to eat, and typically we walk into a large drug store, where in the middle of the drug store is somebody behind bullet-proof glass cashing checks at a cost of anywhere from 2 (percent) to 10 percent per check and also doing money transfers for folks who need to send money back home. That business is a little bit murky; it's not well understood.

We believe that there's a customer base out there. It's going to be a little younger than the traditional check-cashing user. There is a high preponderance of single parenting. A lot of these customers have children. Some of them are on some kind of public support, some of them earn hourly wages. Many of them, by the way, are holding down two jobs, so this is a very hardworking population that has very strong aspirations, and actually, interestingly, is relatively optimistic from a psychographic perspective about the future. Basically, they use these cards to give them what the banking and check cashing systems can't do, and that includes, by the way, the ability to have access to my money, the ability to spend in a way that is anonymous that doesn't identify me as somebody that has to pay with cash, the ability to put my money in a place that's safe and sound, and also the ability to pay my bills.

What we try to be is a fairly valued substitute for those that really don't get the proper level of value for the money from banking and check cashing.

Do you find your customers habitually and are putting money into it every month?

The best way to use the RushCard to help manage your financial needs is to direct deposit your paycheck or your government check, and that way the money is on the card immediately. And by the way, we announced today that we're giving customers access to their direct deposited check up to two days early.

But the basic thing there is that there's no fee for direct deposit, the money is automatically loaded; you can get it early in many instances. Basically, we run the highest direct deposit rates in the business and our customers do stay with us longer, and that's because we've been at it for a long time. We've been doing this for eight years. The majority of our cards were acquired over the years through our direct-response television efforts, where we really spent a good chunk of the last eight years defining the category and explaining its benefits. So our customers have made relatively well-considered decisions as opposed to just picking our card off a rack at the front of a drugstore.

Is RushCard really better than a checking account overall? I looked at your numbers and definitely, if someone's making a lot of overdrafts, it's going to be cheaper to go with the Rushcard, but now with changes to Regulation E, overdrafts are opt-in. Do you still see the RushCard as a cheaper alternative to a checking account?

The fee structure in the banking system remains in disarray. You had BofA, who was going to charge a $5 fee in any month in which a debit card was used, and trust me, you had other banks lined up ready and waiting if BofA had survived that debacle. So suffice it to say, this is a customer that typically cannot maintain the average balance required to avoid entirely a monthly maintenance. So you're talking about a customer that is incurring anyway $10 to $15 a month in these account maintenance fees. And to your point, fewer of our customers now are incurring the overdraft fees, but you've got to remember that there's a host of fees that are still sitting in the banking system.

What I'd say to you is, the reasons to get our card are relatively basic. It's about safety, convenience, peace of mind, ability to segregate funds, ability to get access to my funds early if I  direct deposit. So, to your point, if I'm someone who never incurred NSF fees or who opted out, then I may be in a better place (with a bank). But understand that for our customers, NSF fees have been a way of running their lives, and so one of the reasons we think the card is right is it prevents you from even incurring an NSF fee. Trust me when I say that our customer, if given the option, is still going to opt in to an NSF fee and should not be. It's a bad thing; it's a bad way to live.

Do you think that having no bank branches or ATM to access funds and do other business is a disadvantage? Or do you see not having that overhead is an advantage for you?

I think the answer's probably both. From the perspective of cost structure, there's no question we don't have to find a way to recoup the $350 a year that Jamie Dimon says it costs for Chase to provide checking to any customer.

On the flip side, there's no question that customers need to be able to load their cards and so the best way to make that convenient and easy and cost-free is for the customer to direct deposit. If the customer is unable to do that, then they're going to incur some kind of fee -- the Western Union fee or the Green Dot fee -- and that's not zero, so obviously it's better for us and better for the customer if they direct deposit.

But if you sign up for direct deposit, many banks, including Bank of America, will waive some of these account maintenance fees. So what it seems like you're saying is that maybe right now, if you don't run up NSF fees, free checking might be cheaper, but you're expecting higher fees in the future?

We do feel right now that by and large we are cheaper than most of the accounts offered by the Big Three, because the Big Three have quietly been imposing fees. The CEOs of those companies are on record as saying, one way or another, they're going to have to recoup the fees they just gave up. So while, for example, the BofA $5 debit usage fee has gone away, we don't think that the customer suddenly got a break.

I wanted to ask you about RushGoals, because that was kind of the catalyst for our conversation today. So it's not a savings account?

It's not a savings account. We're not a bank at the moment. We enjoy the services of a bank through a company called Bancorp. But basically, this is a reward product right now, and it was developed in response to feedback from customers that they have trouble segregating their money and what they're looking for is help with their money management.

The RushGoals product makes it easy for you to establish a goal, to segregate the funds in one or more subaccounts. The two dollar a month benefit is just a rebate; it's a small reward for behaving wisely and achieving your goals. But customers told us it's not the reason why they're doing it; they're actually doing it because of the need to set aside funds.

Now, that said, you're right. If you hit the nail on the head and you set aside $500 a month and you keep it aside on average every month for the 12 months, you do earn $24. That equates to 4.8 percent, although to be clear, it's not considered bank interest. Certainly, we'll look at, over time, the appeal of savings to these customers and how we might provide it logistically. But this is something we're able to launch fairly quickly and in a way we think is very appealing to our customers from the standpoint of how they set it up on the Web. It's very intuitive and it's very easy to understand.

So you're planning on going into savings later?

We look at everything and we're always trying to understand, you know, what it is we need to do next to justify our customers' loyalty.

Is Richard Cordray's appointment at the Consumer Financial Protection Bureau going to affect your business at all?

It's always hard to know what an appointment will mean. This is a category that has never been unscrutinized. People do look at it all the time. The category in general is trending toward much greater levels of transparency, uniformity and consistency. Coming from the credit card business as I do, those have been very important factors to me, and I apply the same filter to every business I play a role in.

So I think, in general, we'll watch and wait. But a uniform set of practices means that everyone has to behave in an appropriate way and what's good for the customer should be good for the business.

What do you mean when you say the business has been scrutinized before, who in particular are you talking about?

I'm talking about the fact that there are attorneys general that look at this business all the time.

That idea that you don't see a lot of banks in the neighborhoods that you feel like RushCard serves is interesting. It sounds almost like the banking equivalent of "food deserts" -- areas where there aren't any grocery stores. So the idea is you're trying to bring financial services into areas where there aren't a lot of options?

Yes. I can't speak to our competitors' demographics, but we really do serve an urban customer that traditionally is ignored by the banking system.

It seems like RushCard customers might still need to use a check cashing store. You do cash checks, but it takes up to 10 days, right?

It does, and as a result, (check cashing) is the least used, least effective way to load your card. And it's simply because we have to go through a certain amount of verification to make sure the information the customer has given us matches up. Certainly we'd like to do a better job of that, but because of the customer we serve, it hasn't been an area of focus because we really are focusing on the unbanked.

Read more: Prepaid debit: oasis for unbanked? | Bankrate.com http://www.bankrate.com/financing/banking/prepaid-debit-oasis-for-unbanked/#ixzz1jHbujvKe

Reuters) - As tax season begins, a decision by Wal-Mart Stores Inc to offer some free and discounted tax preparation in conjunction with its check-cashing services at more than 3,000 U.S. stores is less about giving back and more about bringing in, experts cautioned.

NEW YORK (MainStreet) - There's one area of the credit card market that is growing by leaps and bounds - prepaid cards - and federal law enforcement officials say it's a troubling trend that can be accounted for, at least in part, by criminals.

According to the Network Branded Prepaid Card Association, American consumers spent $37 billion on prepaid cards in 2010, about twice as much as 2009.

At the same time, the Federal Reserve Bank has been looking at the issue of prepaid cards and money laundering, which in 2007 led the Federal Reserve Bank of Philadelphia to release a report on the topic entitled "Prepaid Credit Cards: Vulnerable to Money Laundering?"

"A number of observers have also emphasized the potential that prepaid card applications have for more efficiently and effectively delivering financial services to the unbanked and underserved segments of society," the paper states. "Unfortunately, many of the same features that make prepaid cards such a positive payment innovation have also attracted criminals interested in exploiting this new payment form to facilitate money laundering."

In 2005 a group of government agencies collectively released a report called "Money Laundering Threat Assessment" (MLTA) that explained how "stored value cards" create a huge loophole in the cross-border cash transport laws that enable terrorists and drug dealers to bring large amounts of cash into the country without detection. Normally, people entering the U.S. have to declare any cash amount over $10,000. But prepaid cards enable criminals to bypass that restriction, usually by repeatedly "reloading" the card in $9,900 increments on a moment's notice, and allow them much wider latitude in creating further, potentially more serious crimes.

"The MLTA emphasizes that the money laundering risk associated with prepaid cards lies in their easy transportability and the relative ease of moving and potentially accessing monetary value anonymously," the Federal Reserve said about the investigation. "The report further notes that prepaid card programs that do not require customer identification or that do not include rigorous monitoring of suspicious activity are most at risk for money laundering abuse."

Just ask the law enforcement officials who tracked the 9/11 Al Qaida terrorists how prepaid cards have changed the crime-fighting battlefield. U.S. authorities were more easily able to catch the moneymen behind the 9/11 attacks - in large part because of their transparency in moving money into the U.S.

According to a 2005 report from the Treasury Department "The 9/11 hijackers opened U.S. bank accounts, had face-to-face dealings with bank employees, signed signature cards and received wire transfers, all of which left financial footprints. Law enforcement was able to follow the trail, identify the hijackers and trace them back to their terror cells and confederates abroad."

"Had the 9/11 terrorists used prepaid ... cards to cover their expenses," the report continues, "none of these financial footprints would have been available."

Today, the federal government is bringing the hammer down on prepaid credit card use, especially those "reloadable" cards that make it easy for criminals to keep pouring cash into the card without detection. In a word, federal authorities are now asking prepaid card providers to keep a running record of how each consumer uses the card, and how many transactions the consumer makes during a five-year period.

It's way too early to say how effective the new rules will be, and how much of a burden it puts on an otherwise thriving industry (a rarity in this economy), but Uncle Sam has taken a cold, hard look at the gaping loopholes exploited by criminals and terrorists using prepaid cards, and he doesn't like what he sees.

That means prepaid card users with illegal intent have a big, fat target on their backs, which won't go away anytime soon

The prepaid debit and payroll card market will total $105 billion in value loaded into accounts by 2014, up from $24 billion in 2009, according to an Aite Group LLC report released June 30. For its research, Aite in February and March surveyed 500 U.S. consumers based on their use of alternative financial services, such as prepaid cards, payday loans and check-cashing services.

Nine out of 10 existing prepaid customers said they were "extremely" or "very" satisfied with their prepaid cards, but many past and present cardholders did not view prepaid cards as a long-term service. Eight out of 10 former prepaid card users said they saw the product as something only for short-term use, and six out of 10 existing prepaid customers expressed a similar view, the survey found.

"So that's a warning sign for prepaid card issuers that, even among the more loyal and satisfied customers, only a minority see it as a long-term" service, Ron Shevlin, the report's author and an Aite senior analyst, said in an interview.

The report suggests that issuers offer incentives for long-term use with loyalty and reward programs.

In the study, Aite explored four customer segments: existing prepaid cardholders, former cardholders who at some point used a card in 2010 but not in the fourth quarter, payday loan borrowers and check cashers. Participants were asked how they perceived prepaid cards and what types of extras they would like to see, such as savings accounts and paper checks. At 15% of respondents, payday loan borrowers were the least likely to view prepaid cards as a better alternative to a checking account. But nearly half, 48%, saw it is as a better option than a credit card, which Shevlin said provides hope to issuers that they could penetrate even that checking-entrenched market. "Clearly it's a minority, but there's still an opportunity to target payday loan borrowers," he said.

Another of the report's suggestions is that issuers position prepaid cards as a long-term alternative to a checking account and that they give potential customers realistic expectations of what they would receive with a particular prepaid card.

Only 14% of former cardholders surveyed described themselves as "extremely satisfied" with their prepaid cards, and Shevlin said he believes they may have had mistaken expectations, such as credit-building services or a savings account option. He suggests that issuers offer alternative card versions that include such perks or services to win back former customers and broaden the appeal for new customers.

"It seems to us like there's a really big opportunity to make prepaid cards a much more mainstream product," Shevlin said.

In an age where 93% of all business marketing participates in social media and even brokers at financial firms are now harnessing the power and reach of social media for research, client communication, and to attract potential clients and prospects, it seems that social media is critical to the growth of Prepaid as well.

While compliance guidelines and regulations continue to worry many in the Prepaid industry, they are not alone. If you speak to any social media thought leader, they will tell you that many corporations face challenges in using social media, both externally and internally. However, it is possible to walk that fine line since social media isn't going away. And when you look at its merit and power to reach and educate clients and consumers far and wide, especially the underbanked, the more it seems like a winning situation.

Here is where we look at whose IS doing social media well. Innovation and progress rarely happen in a vacuum. Sometimes it's as simple as looking at leading experts outside of your industry for inspiration and ideas or perhaps even sitting down together for a business strategy discussion.

Prepaid Expo recognizes the challenges facing prepaid professionals and strives to meet those needs. In an effort to learn from those who have survived the challenges presented by a maturing industry and inspire the seasoned prepaid executives, Prepaid Expo is looking beyond prepaid for inspiration.

First, we will bring the leading experts from Airlines, Pharmaceuticals, Finance, etc., to address the Prepaid Expo audience on how they came out on top when facing similar challenges. Second, we created VIP sessions for each outside expert, giving senior executives the opportunities to get their questions answered by the experts in a private forum like setting.

If you would like a chance to discuss your business needs and challenges with your peers and experts at Prepaid Expo 2012, sign up today and save the date: March 12-14, 2012. We will see you in Las Vegas!