FARMERS BRANCH, Texas (2/6/14)--Prepaid reloadable cards are often touted as a good fit for unbanked Hispanic consumers who rely one expensive fringe financial service providers to cash checks and send money to relatives in another country. But Hispanic consumers will only embrace prepaid cards if the fee structure is consumer-friendly, according to Miriam De Dios, president/CEO of Coopera.
"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," De Dios told the Cornerstone Credit Union League (Leaguer Feb. 5).
Better yet, prepaid card programs should offer a path to savings and checking account status, De Dios advised.
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, because 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 said.
Beacon FCU, LaPorte, Texas, has offered prepaid cards since 2011. It's been a challenge getting members to embrace the product, said Adelina Gomez Abshire, director of business development for the $128 million-asset credit union.
"We have garnered feedback from the community about the prepaid cards, and we've discovered that there are a lot of misperceptions," Abshire said. "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."
The 40-and-over Hispanic demographic, unfortunately, tends not read all of the disclosures, Abshire said.
"They get their information from a trusted relative or friend," she added. "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, De Dios said. Prepaid reloadable cardholders can save on check-cashing fees, money order fees and money transfer fees by using their card instead of using expensive fringe financial service providers.
"Some prepaid card solutions charge load fees, activation fees and interactive voice response system support fees," she added. "Solutions that limit their fees and have low- or no-cost services are the best solutions. The cardholder fee structure is important for credit unions to understand when selecting a prepaid reloadable card option."
When consumers purchase prepaid cards, they should also be offered financial education and options to develop an account-based relationship that can help the cardholder meet his or her financial goals, De Dios said.
"While a prepaid reloadable card can give the cardholder more access to 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 said. "A prepaid reloadable card and a relationship with their local credit union will."
For those members with no other way of opening an account, prepaid cards have proven to be their best option, Abshire said.
Another important consideration is the cultural relevancy and language support available for the card program, she added. Without access to account information in Spanish and no bilingual cardholder support, a Spanish landing Web page is not going to be attractive to a Hispanic consumer who 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," suggested De Dios.