Who Wants a Reloadable Debit Card vs. a Checking Account?

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Are reloadable debit cards a viable alternative to checking accounts? Or are they a solution for the unbanked and those who don’t typically qualify for checking accounts?

By Rob Rubin, Managing Director,

On the surface, a checking account and a reloadable debit card might look similar. Both provide mobile banking, online biilpay and direct deposit. You can even purchase checks with Bluebird by American Express.

For the last six months,  has presented four different reloadable debit cards to consumers shopping for a new bank or credit union. How would shoppers react to these products when put side-by-side with checking accounts? In Q4 2013, shoppers selected these products only 2.6% of the time. For comparison, shoppers selected a free checking account 50% of the time, with the balance of shoppers selected checking accounts with monthly fees (although many of these shoppers’ minimum balances were high enough to avoid monthly service fees).

checking_accounts_vs_reloadable_debit_cards

Who’s selecting reloadable debit cards?

Shoppers with lower balances. The mean lowest daily balance for shoppers selecting reloadable debit cards is significantly lower than shoppers who selected traditional checking account products. This suggests reloadable debit cards appeal to younger shoppers and households with lower incomes.

Shoppers with fewer requirements. Reloadable debit card shoppers identified fewer features as “must haves” than shoppers selecting traditional checking accounts. 61% of those selecting reloadable debit cards did not identify any must have features, but more than half of those selecting traditional checking accounts had at least one must have feature.

Younger shoppers. In Q4 2013, 11.6% of shoppers checked off that they wanted student checking accounts included in their results. Those selecting reloadable debit cards were 32% more likely to have requested student accounts (15.3%). Interestingly, these “student” shoppers were more likely to indicate must have features than other shoppers selecting reloadable debit cards. Their top feature requirements? 1) Surcharge-free ATM access, 2) Mobile Banking and 3) Mobile Check Deposit.

Shoppers that use ATMs more frequently. 74% of people who chose reloadable debit cards indicated they use an ATM machine at least weekly, compared to 65% of all shoppers. It’s not surprising that surcharge-free ATM access is the most popular feature with these shoppers.

Shoppers that overdraw their accounts. You can’t overdraw reloadable debit cards, but 76% of shoppers selecting these products indicated they’ve overdrawn an account at least once over the last year, compared to 61% of shoppers who selected traditional checking accounts. This suggests reloadable debit cards appeal to shoppers that don’t qualify for traditional checking accounts. Many “second chance” checking accounts have high fees compared to reloadable debit cards.

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