Grading the Prepaid Card Industry
We recently supported a new report from the Center for Financial Services Innovation (CFSI) on prepaid credit cards called The Prepaid Industry Scorecard: Assessing Quality in the Prepaid Industry With CFSI’s Compass Principles.
It would be understandable if you’re wondering why. It’s not immediately obvious why improving the quality of prepaid cards — which can be used to receive income, pay bills and make everyday purchases — is related to our mission: building brighter futures for children, families and communities.
But for children to succeed, we need to strengthen the entire family. That means helping families save and grow their finances. The state of family finance in the United States today is alarming. Two in five Americans report that money is the biggest cause of stress in their life. More than three-quarters of Americans say they do not have enough savings to cover six months of living expenses, and more than one-quarter say they have no savings at all. The families at the heart of Casey’s mission are highly likely to be among these numbers.
With no savings, families have little or no cushion. This makes them more likely to suffer serious setbacks when confronted with even minor challenges. A car breaking down can spiral into a lost job. A minor medical problem can lead to significant debt.
Having access to, and using, high-quality financial services is a critical component of building a financial life that functions smoothly, enables families to weather the inevitable ups and downs of life and allows them to plan for the future.
For millions of Americans, prepaid cards help accomplish these goals. At the same time, these cards are relatively new as a financial product, and they have room to improve. CFSI’s Prepaid Industry Scorecard assesses the quality of prepaid cards through the lens of the Compass Principles, aspirational guidelines that affirm standards of excellence in the design and delivery of basic tools that people use to manage their daily financial lives.
Among the scorecard’s findings: The overall quality of prepaid cards is high. They give consumers multiple, convenient ways to perform basic transactions such as paying bills, withdrawing funds and receiving paychecks from their employers if they don’t have bank accounts.
But there is room for improvement. The cards have the potential to become even more valuable financial tools if they provide additional features such as enabling cardholders to save money, budget and access low-cost loans that meet the myriad needs of low-income consumers and families without exploiting them.
This report is an important resource as the prepaid card industry, and the use of these cards, continues to grow. People who are able to conduct day-to-day financial transactions — such as going to the grocery store — with ease are more likely to achieve financial stability for themselves and their families in the long run. As the quality of these and other basic financial tools improves, families will find themselves in a much better position to build brighter futures for their children.
Check out the complete CFSI scorecard.