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Banks make up for lost revenue through prepaid cards

[Saturday, June 18th, 2011]

Americans who eagerly await their benefit checks from the government each month can now breathe a sigh of relief. Government agencies have now started automatically loading the benefit funds onto the prepaid accounts of the beneficiaries to make way for seamless transactions and reduce the wait time. The increasing demand from the government agencies and employers in addition to the federal government in increasing the need for prepaid cards and the banks are not complaining.

There were transactions worth $65 billion that were billed through prepaid cards last year, which was a significant increase, considering the total in 2009 which accounted to $48 billion as per the Neilson report. This would have benefited the banks greatly since they made up to $1 billion in revenue from these cards. This has come as a relief to the banks that suffered a loss of up to $25 billion in terms of revenue from credit and debit cards as a result of the implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009.

Though a large segment of the prepaid credit cards includes the cards issued by retail outlets and drugstores, banks are now seeing the immense potential of these cards in generating the lost revenue and the advantages they provide to employers and government agencies that issues benefits to various residents in the country.

One of the two types of fees collected by prepaid cards is the fees for each transaction done using the card. While the CARD Act limits that swipe charges for regular credit cards, the prepaid cards do not come under that segment, offering respite to the banks.

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