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Prepaid Cards Move Beyond the 'Underbanked'
CNBC.com | July 11, 2012 | 10:53 AM EDT

Prepaid bank cards — reloadable debit cards originally designed for consumers without bank accounts — are becoming more mainstream.

As competition for the growing population of 'underbanked' spenders rises, banks keep lowering their fees on prepaid accounts, which is prompting some to rethink their business model.

“These are really small accounts that don’t have a lot of transactions happening compared to middle-income accounts. It's hard to make money; prepaid is not a slam dunk business," said Rachel Schneider, vice president at the Center for Financial Services Innovation .

As a result, prepaid card providers are busy adding card features to attract customers with traditional bank accounts — while still vying for their corner of the underbanked market.

"Prepaid cards have been moving upmarket, to middle income customers. At some point, we’ll all be using prepaid cards. I think in 10 years, they'll be ubiquitous," said Schneider.

Prepaid cards meet a clear demand. Consumers can get a prepaid card with or without a good credit score, or a bank account. And be it shopping online, renting a car, or reserving a hotel room, they can use the card for the many daily activities that cash just won't cover.

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