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Inside the Vault | Fall 2011

Economic Snapshot

Prepaid Market is Small But Growing Rapidly

Second Quarter 2011

  Q3-’10 Q4-’10 Q1-’11 Q2-’11
Growth Rate—Real Gross Domestic Product 2.50% 2.30% 0.40% 1.0%*
Inflation Rate—Consumer Price Index 1.40% 2.60% 5.20% 4.10%
Civilian Unemployment Rate 9.60% 9.60% 8.90% 9.10%

*second estimate
GDP – Bureau of Economic Analysis: www.bea.gov
Unemployment and CPI – Bureau of Labor Statistics: www.bls.gov

Prepaid Debit Payments

Prepaid Debit Payments by Type (in billions)

*Private label transactions are prepaid cards which are limited in usage to one or several merchants—a closed-system card.

1. What percent of all prepaid cards were general purpose cards in 2009? In 2006?

In 2009, general purpose cards comprised 22 percent of prepaid debit payments compared to only 9 percent in 2006.

2. How do general purpose cards differ from private label and EBT cards?

Private label cards are merchant specific. They are generally not reloadable. EBT cards are government-issued prepaid cards that allow recipients to receive financial benefits. The recipients use these cards widely to purchase goods and services. EBT cards are reloadable; the government reloads the card when benefits are due. General purpose cards are also reloadable, but they are reloaded by the cardholder. They can be used widely for goods and services.

3. Which type of prepaid debit card was used most in 2009? How many payment were made by this type of card?

The most used prepaid card was the private label card. 2.7 billion transactions were made with this type of card.

4. Which type of payment card has grown the most in use from 2006 to 2009?

The general purpose card.

Noncash Payments

1. Review the pie charts above. Create a table that uses the same data as the pie charts. Then write a description of how the distribution of noncash payments has changed from 2006 to 2009.

Debit card payments have increased greatly. Credit card payments have decreased. ACH payments have increased. Prepaid card payments have increased. Check payments have decreased.

2. The use of debit cards has increased while the use of checks and credit cards has declined. Between checks and credit cards, which is a close substitute for debit cards? Why?

Checks are a close substitute for debit cards because debit card
payments are taken directly from your checking account, the same as check payments.

3. Why is the use of checks declining as the use of debit cards increases?

Checks are inconvenient when compared to debit cards.

4. Why are credit cards not considered a close substitute for debit cards?

Payments made by credit cards are paid by the bank that issued the credit card. You pay the bank back at a later date. So, transactions you make by credit card are loans.

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