WSJ: Prepaid cards find a niche

Michelle Higgins reports on the growth in prepaid cards.

The new cards are the latest indication that competition among card issuers has never been more brutal. Americans who carry plastic already have an average of nearly eight cards in their wallet. To win new customers, card companies have been competing fiercely with new offers of 0% cash advances and other deals. But with the credit-card market so saturated, they are under pressure to find new sources of growth.

“They’re segmenting the market into finer and finer niches in order to capture more market share and define more payment uses,” says card consultant Rob Markey, of Bain & Co. in New York. What’s more, prepaid cards — which describes all the new cards except for American Express’s — are a “very low loss-rate product,” he says. That’s because customers must cough up the money in advance. That is an important consideration these days with credit-card companies writing off record amounts of bad debts.

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