Underbanked Americans Make a Case for Gift and Other Prepaid Cards

Underbanked Americans Make a Case for Gift and Other Prepaid Cards

In 2019, according to Simmons data featured in the recent Packaged Facts report Consumer Payment Card Usage Trends in the U.S., 39% of U.S. adults purchased gift cards and 14% purchased prepaid cards other than gift cards.  In contrast to debit card or credit card use, overall rates for buying gift cards has notched downward in recent years, while rates for using prepaid cards other than gift have remained fairly stable.

Though popular across all income levels, gift/prepaid cards are basically a form of prepaid debit, and when marketed as such they are more popular among lower-income Americans, who are less likely to have bank accounts than more financially secure Americans. The 2017 FDIC National Survey of Unbanked and Underbanked Households estimated that 6.5% of households were unbanked, and another 18.7% underbanked, meaning they had bank checking or savings accounts but also sought out alternative financial services outside of the banking system.  These percentages may increase in the wake of  economic downdraft triggered by the current coronavirus pandemic.

Lower-income Americans often seek the benefits of traditional debit cards in gift or prepaid cards, while avoiding the need to sign up for or qualify for a savings or checking account.