Having worked within the debt management industry for three years, an issue I’ve experienced is that people have their bank accounts closed if they have any debt with their bank.
If you were about to enter into an IVA and you’re listing your bank as one of your creditor’s, you will have to close your account, which is a necessary step on your way to a debt free life. However, the scandalous part is that many of the high street banks are now no longer willing to offer you even a very basic bank account.
This will leave you with nothing but a cash card to draw our your own money, even though you are doing everything you can to pay back as much as you can towards your debts.
Only 7% of Post Office account holders recommend them
Many people are left thinking their only option is a Post Office style account. These are great to have money paid in to, but they don’t come with an option to create standing orders or direct debits – you’re only given a cash card to withdraw money – so you’re unable to pay over the counter or shop online with them. A meagre 7% of customers who have had one recommend them on review centre.
Prepaid card availability rises by 380% in the UK
This is where the prepaid card industry really becomes a great option. With these accounts you can have a debit card and all the other functions of a high street account. You can have your own debit card and carry on with your life as normal. On some cards there is even an option to help repair your credit rating and some offer purchase protection just like a credit card.
Latest figures the trade association representing the prepaid card industry, The Prepaid International Forum (PIF), show that the UK has seen an explosion in the number of prepaid card products available to consumers, from 50 in 2007 to over 240 currently on offer.
PIF also reports that with this growth in availability of prepaid products is driving greater regular use of prepaid cards to pay for goods and services.
Credit card transactions decline by 13%
These prepaid cards can be used in very much the same way as everyday credit and debit cards, but are becoming a preferred method of payment amongst people because they offer control. Prepaid cards are pre-loaded with a set amount of money, unlike a debit cards that take the money directly from a person’s bank account, or a credit cards with a set balance to spend.
The rise of the prepaid card has also coincided with the decline in usage of credit cards. In June last year, the British Retail Consortium revealed the number of transactions involving credit cards had fallen by 13%.
An example of this decline is that consumers are increasingly using prepaid cards to reduce the risks of online shopping. Across the EU, 6% of all prepaid cards are used specifically for online purchases, helping people avoid the risk of bank or credit card details being stolen and used by fraudsters.
People in Italy are three times more likely to use a prepaid card
Prepaid cards are also seen as beneficial for those who may not have a bank account (such as teenagers), but still need to be able to make purchases online or over the counter when it’s not convenient to carry cash. Parents see prepaid cards as offering greater freedom and security for their children, but without the risk of overspending.
2% of prepaid cards in the UK are being used in this way, as alternatives to bank accounts, a figure likely to rise when banks begin charging for all but the most basic banking services. This is the case in Italy where 15 million people do not have bank accounts and are three times more likely to use a prepaid card as an alternative to traditional banking.
When the banks start charging for even the most basic of services are you going to remain loyal to the high street?