Cash is no longer king. For decades, Americans have gradually shifted towards cards, and the Fed now reports that less than 20 percent of transactions are completed with cash. Debit and credit cards combined, meanwhile, make up more than 50 percent of payments. The rise of online shopping, fees for getting cash back at stores, and even coin shortages help explain why cash has fallen to the wayside.
These days, a cash allowance can be a hassle for parents who themselves may simply not have as much cash on hand. Prepaid cards, however, are a great option for teaching children financial literacy. And with nearly 75 percent of teens reporting that they're not confident with their financial education, some lessons now could go a long way throughout life.
If you start your child with a traditional debit card linked to a savings account, a swipe here and a swipe there can quickly turn into swipes everywhere. Next thing you know, your child's savings account could be running on empty. Prepaid cards set spending limits and will encourage kids to spend within their budget.
The Federal Deposit Insurance Company (FDIC) found that over 8 percent of households were using prepaid cards in 2019. Infosys reports that the global prepaid card market will top $3 trillion in 2022. Besides parents, unbanked individuals are turning to prepaid cards.
Governments are using cards as well. If you use public transportation, there's a good chance that you've used one.
