While most affluent Americans may have never ever even heard of a prepaid debt alternative until now. However, the NY Times is reporting that prepaid cards known as re-loadable cards are among the consumer banking industry’s fastest growing products.
What is it, what is it? A prepaid card is pay as you go cash inside a card. You load it with cash and spend it as you please. The NY Times stresses that the prepaid cards can be purchased as easy as a bottle of shampoo or even a candy bar by visiting a major drug store or your local Wal-Mart. The marketing strategy for prepaid cards is very appealing to the target audiences they serve and the target is the under-served in the banking industry. The prepaid cards are designed for persons that can not get bank accounts for whatever reasons. Remember this is an alternative to having something that you would otherwise not be able to receive. Solutions for access to cash via ATM, debit card purchases, etc.
NY Times exposed the hidden fees of prepaid cards. The report revealed how customers are charged to activate the card, fees for point of purchase usage, etc. To make the storyline more compelling NY Times highlighted a black male who was using a prepaid card, one of the many choices other than the RushCard offered by Russell Simmons. We got to experience the pain plus frustration the man experienced with having to use a prepaid card and he informed us he really needed all his money because he has a newborn at home.
As related to Russell Simmons and other celebrities supporting prepaid cards the NY Times revealed:
“In the years since, dozens of companies and banks have latched on, some offering celebrity branding to lure customers. Johnny Cash, Usher, Carmen Electra and the football player Vince Young have all had their name attached to a prepaid card, and the hip-hop impresario Russell Simmons continues to back the RushCard, mainly to African-Americans, as a “better alternative” than banks and credit cards.
But these efforts are not without controversy. Mr. Simmons, for example, has batted down repeated criticism that his card saps money from low-income users. His Pay-as-You-Go card has come under scrutiny for charging a $19.99 activation fee deducted from the cash first loaded onto the card; a $1 convenience fee for the first 10 purchases every month; and a fee of $1 for every bill paid with the card.”
Simmons fired back at the NY Times using his media outlet Global Grind. He got their attention with the title “Dear New York Times”. Additionally, Global Grind now reports, “We received a very gracious communication from the NY Times offering to hear Russell’s vision…stay tuned…”
These are some of the words Russell had to say to NY Times
“I’m outraged that you would publish an article that associates the RushCard with other financial products, some of which prey on the underserved. The article was, in my opinion, unfair, misinformed and bordering on slanderous. The RushCard is not just a prepaid card, it’s an empowerment program that took me many years to build. It was built specifically to help people in underserved communities. It offers more than a prepaid card or a bank account.” Read more
Is the banking industry prepared for what to do next when it comes to prepaid cards?