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The Pros and Cons of Prepaid Reloadable Cards for Hispanics
Wednesday, February 5, 2014 6:45 AM

Hispanic consumers spending time and money to cash checks, to buy money orders to pay bills and to send money to relatives abroad stand to save their money and time by using a prepaid reloadable card. However, as Coopera CEO Miriam De Dios points out, not all prepaid reloadable cards are created equal.

“While there has been a rise in popularity of prepaid solutions, particularly for the unbanked, not all solutions have been created with the Hispanic consumer in mind, nor are they generally consumer-friendly solutions,” she says.

Prepaid reloadable cards are a hybrid of gift cards and debit cards. Cardholders load and reload money onto their card and then use it to make purchases and withdraw cash at an ATM. It’s relatively easy to obtain a prepaid reloadable card, since a financial institution account is not required, nor is a credit history.

“These cards provide cardholders an easy way to manage their money, have additional access to their money and a safe-tool to carry their money,” De Dios notes.

Beacon FCU has been offering prepaid cards since 2011, and Adelina Gomez Abshire, director of business development for the La Porte, Texas-based credit union says it’s been a challenge getting members to embrace the product.

“We have garnered feedback from the community about the prepaid cards, and we’ve discovered that there are a lot of misperceptions about the prepaid cards,” she says. “We learned from our dialogue with the community that Hispanics age 40 and older prefer to pay in cash because they perceive that prepaid cards have too many hidden fees.”

Abshire notes that this particular demographic, unfortunately, tend not read all of the disclosures. 

“They get their information from a trusted relative or friend that tells them, ‘I used this prepaid card and...’” adds Abshire. “Once they start getting charged fees, they stop and go back to their source of using cash or money orders.”

For the unbanked, there are advantages of having a prepaid reloadable card. Prepaid reloadable cardholders can save hundreds of dollars in check-cashing fees, money order fees and money transfer fees by using their card instead of using expensive fringe financial service providers. However, De Dios says that’s only true if the card’s fee structure is a consumer-friendly one.

“Some prepaid card solutions charge load fees, activation fees and interactive voice response system support fees. Solutions that limit their fees and have low or no-cost services are the best solutions,” she adds. “The cardholder fee structure is important for credit unions to understand when selecting a prepaid reloadable card option.”

A very big consumer disadvantage of using a prepaid reloadable card is not receiving any relevant financial education or the option to develop a relationship with a financial institution that can help the cardholder meet their financial goals.

“While a prepaid reloadable card can give the cardholder more access to their money and can save them a lot of money, it’s not going to help them build credit and get a car loan,” De Dios points out. “A prepaid reloadable card and a relationship with their local credit union will.”

For those members with no other way of opening an account, Abshire says the prepaid cards have proven to be their best option.

Another important consideration is the cultural relevancy and language support available through the card program. Having a Spanish landing page, without access to account information in Spanish and no bilingual cardholder support is not going to be attractive to a Hispanic consumer that needs this card.

“Credit unions need to look at options that provide a seamless, culturally relevant and in-language experience in their prepaid reloadable card program,” suggests De Dios.

 

Helpful Links: The Cornerstone Credit Union League’s Juntos Avanzamos initiative.