Prepaid debit cards are widespread in the U.S. and they continue to
grow in popularity. Prepaid cards include gift cards issued by
retailers or payment networks, as well as general purpose
reloadable (GPR) cards such as the American Express Bluebird card,
and payment cards disbursed by federal,
state and local governments for assistance programs.
A 2014 survey by Mercator Advisory Group found that 56
percent of U.S. adults had bought some kind of prepaid card in the
previous year, up from 53 percent in 2013 and 47 percent in 2012.
The number of payments made with prepaid cards rose 18.5 percent
per year between 2006 and 2012 -- the fastest growth rate of all
types of payments in that timeframe.
Gift cards still popular with givers and receivers
Gift cards have become a mainstream financial instrument, and
are among the top gift choices for both givers and receivers. When
asked in April 2015, nearly half of all consumers said they had
used a gift card in the previous year.
Some 87 percent of consumers say merchant-specific gift cards
are easy to use.
That's probably among the reasons gift cards were the most
requested holiday gift item in 2015 for the ninth year in a row,
according to the National Retail Federation's Holiday Consumer
Spending Survey. Approximately 58.8 percent of consumers said they
would like to receive a gift card during the holiday season.
Sixty-five percent of gift card recipients spend an average of 38
percent more than the face value of their cards.
Many of those wanting gift cards are likely to get their wish.
Approximately 73.4 percent of American adults planned to buy at
least one gift card during the 2015 holiday shopping season,
according to the NRF's survey, which was conducted in October 2015.
Women were more likely to buy them than men, with 76.2 percent of
women planning to buy gift cards during the 2015 holiday season,
compared to 70.4 percent of men.
When respondents who planned to buy gift cards were asked how
many cards they would buy, the most popular number was two.
Total spending on gift cards during the 2015 holiday shopping
season is expected to be $25.9 billion. But average spending is
expected to dip to $153.08, down from $172.74 in 2014.
Men are predicted to be the more generous gender, spending on
average $162.01, compared to women, who predict they'll spend an
average of $144.62 on gift cards. Adults over 65 may be the
biggest gift card spenders of all age groups, averaging $186.44.
Breaking that down by card, shoppers are expected to spend an
average of $44.83 per card during the 2015 holiday shopping
period, down from $47.87 in 2014.
Gift cards fall into two major categories. Open loop cards are
those issued by Visa, MasterCard, American Express or Discover,
which can be used at any merchant that accepts credit cards that
are part of those networks. Closed loop cards are those issued by
a particular retailer and can only be used by the issuing
When gift card buyers were asked what type of gift cards they
intended to buy during the 2015 holiday shopping season, the most
popular choices were closed loop cards from restaurants (34.8
percent) and department stores (34.4 percent), followed by open
loop cards (22.7 percent) and coffee shop cards (20.1 percent).
Why do Americans buy gift cards during the holiday season?
Approximately 50.4 percent said gift cards allow recipients to
select their own gifts. That was followed by 24.7 percent who
said gift cards were easier and faster to buy than traditional
gifts. Only 5.2 percent said buying gift cards helped them stick
to their holiday budget.
Digital expected to lead way in slowing market
The overall market for gift cards continues to grow, but as
the industry matures, its rate of growth is slowing from
double-digit rates in earlier years.
As of December 2014, gift card sales for 2014 were predicted
to reach $124 billion, five percent higher than in 2013. The
market is expected to continue growing 5-6 percent per year
Open loop cards are growing slightly faster than closed loop.
Sales of open loop cards rose from $43 billion in 2013 to $45
billion in 2014 (4.7 percent). Sales of closed loop cards grew
from $70 billion in 2013 to $73 billion in 2014 (4.3 percent).
E-gifting, or the sending of digital gift cards, is picking up
momentup as plastic card growth levels off. E-gifting grew 20
percent, from $5 billion in 2013 to $6 billion in 2014. In fact,
e-gifting is expected to hit $14 billion by 2017, comprising
nearly 10 percent of the gift card market.
When consumers are shopping online, they increasingly choose
to buy digital gift cards rather than physical gift cards. In
December 2014, digital gift cards accounted for 67 percent of
etailers' gift card sales while physical gift cards accounted for
Some 72 percent of consumers said they had purchased a gift
card online or via the mobile channel. Fifty percent said they
would prefer to have a digital gift card scanned from their phone
than carry an email printout. Also, 53 percent said they would be
interested in storing gift cards on their phones.
Spillage is the amount of money left unspent as a result of
unused or expired cards. In 2014, spillage was projected to fall
under $1 billion, accounting for less than 1 percent of total
gift card volume. That's down from 2006 when spillage accounted
for nearly 10 percent of gift card volume, thanks in part to
provisions of the CARD Act of 2009, which forbids gift cards from
expiring for five years.
There are a number of ways that you can avoid spillage. In
, shoppers who have closed loop gift cards can request that the
card balance be given to them in cash back once they've spent
down to a certain threshold.
General purpose reloadable cards: the checking account
GPR prepaid cards fill a different market need from gift
cards. They are typically used to pay bills, access cash and make
purchases, and can be used in place of a credit or debit card, or
even a traditional bank account.
More and more Americans are using them. In August 2013, 25
percent of Americans owned a GPR prepaid card, up from 21 percent
the year before.
Some $65 billion was loaded onto GPR prepaid cards in 2012 --
more than twice the amount loaded in 2009.
That, despite the fact that many prepaid card transactions are
for small-dollar purchases.
In 2012, 20 percent of general purpose prepaid card transactions
were for less than $5.
According to 2012 data from The Pew Charitable Trusts, prepaid
card users are more likely than the general population to:
- be renters
- be married
- earn less than $25,000
- be African-American
- be under 50.
Forty-two percent of prepaid card users in 2012 had no emergency
savings, compared to 28 percent of the general population.
GPR cards were at one time largely targeted at low-income and
underbanked consumers. In fact, 48 percent of the
underbanked community reported owning a GPR card in 2013.
However, the greatest growth in card ownership has been among
higher income Americans. Between August 2012 and August 2013,
ownership of a GPR card in households that made more than
$100,000 per year increased by 9 percent, while ownership of a
GPR card in households earning between $25,000 and $49,900
dropped 1 percent.
In 2013, the average income of Americans with GPR prepaid
cards was $63,217, up from $55,347 in 2012. Americans with
higher incomes spent the most money on their reloadable prepaid
cards. Households with GPR prepaid cards and incomes of $100,000
or higher had an average reload value of $98, compared to $85,
$78, and $60 reload values for households making $50,000 to
$99,900 per year, $25,000 to $49,9000 per year and less than
$25,000 per year respectively.
While GPR use has risen among all age groups, younger groups
have seen the most growth. There was an 11 percent increase in
ownership of GPR cards among millennials between August 2012 and
August 2013. Among Generation Xers GPR card ownership increased
by 8 percent.
Ownership by baby boomers increased by 2 percent and consumers 68
and over saw their GPR card ownership stay the same at 4 percent.
The appeal of prepaids
The most common reasons people cited in 2012 for using prepaid
cards were to make purchases in places that don't accept cash, to
avoid credit card debt, to control spending and to avoid
Although 33 percent of prepaid card users in 2012 said they
incurred fewer overdraft fees,
there are also fees associated with prepaid cards. In 2013, 68
percent of GPR prepaid card users paid some type of fee, with the
average monthly fee total at $5.80.
Twelve million adults -- 5 percent -- used a GPR prepaid card
at least once per month in 2012.
One in five prepaid card holders used two or more prepaid cards
per month; among the reasons: a desire to control spending on
different items or give different people in a household access to
Higher-earning millennials are most likely to be prepaid card
"power users." Millennial GPR prepaid card users earning $50,000
to $99,900 per year averaged 10.1 uses per month, compared to an
average of 6.2 uses among all GPR prepaid card owners who had
used a card that month.
Mercator Advisory Group, "Consumers and
Prepaid: Rising Use, Especially by Mobile"
2013 Federal Reserve Payments Study, Detailed
Report, released July 2014
Blackhawk Network, "How America Pays in 2015:
Traditional, Digital and Mobile Convergence in Payments"
National Retail Federation, "2015 Holiday
Consumer Spending Survey"
National Retail Federation 2015 gift card
CEB press release, Dec. 10, 2014
InComm press release, March 17, 2015
Federal Reserve of Philadelphia report,
"Millennials and Money: A New Look at Who Uses GPR Prepaid
Cards," released Sepember 2014
The Pew Charitable Trusts. "Why Americans Use
Prepaid Cards," released 2014
CEB, "Gift Cards State of the Union 2014"
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