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Friday, September 7, 2012

Latinos and Prepaid Cards: It's About Overbanking, Not Underbanking

Prepaid debit cards are growing in popularity among Latino Consumers.  Packaged Facts' new report Consumer Payments in the U.S.:  The Latino Market reveals that between 2011 and 2012 the number of Latinos using prepaid cards increased by 7.2%.  At the same time, the total number of consumers using prepaid cards grew by only 1%, and use of prepaid cards by non-Latinos declined by 0.5%.  Thus, Latinos drove the growth in prepaid card use during this period.

It might be expected that the popularity of prepaid cards among Latinos would be due to the higher propensity of Latinos to use cash, and relatedly to their lower propensity have checking accounts.  The results of a survey of Latino prepaid card users published in 2011 by Washington, D.C.-based National Council of La Raza (NCLA) provide some support for this view.  The NCLA study found that 26% of Latinos obtaining a prepaid card did so because “it was cheaper than going to a check casher.” Nearly half (48%) said that what they liked most about prepaid cards is that “I didn’t have to carry cash.”

However, NCLA found that the top benefit of prepaid cards as reported by Latino users relates to a desire to manage spending rather than a desire to find a replacement for cash.  More than 60% of those participating in the study liked using prepaid cards because “I could only spend the amount of money that I had.”  The fact that using a prepaid card “was convenient/saved time” was a benefit noted by 42% of respondents.

As our Consumer Payments in the U.S.:  The Latino Market report notes, 20% of Latinos with checking accounts used a prepaid card in the last 12 months, compared to only 14% of Latinos without checking accounts.  Therefore, Latino use of prepaid cards seems to be less about being underbanked and not having checking accounts and more about avoiding being overbanked and falling prey to credit card debt.

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