Prepaid cards: The future of debt management?

As consumer debt reached £1.44 trillion this summer, Newcastle Building Society Card Solutions, one of the premier providers of MasterCard prepaid cards in the UK and Europe, today predicts a 10% growth in the number of prepaid cards used by people with individual voluntary arrangements (IVAs) by 2012.

By this time next year the total number of issued prepaid cards in the UK is estimated to reach over 10.8 million and the total value spent on these cards is expected to exceed £697 million. As the market grows over the next four years, Newcastle Building Society Card Solutions, which currently has 500,000 cards in regular monthly use, predicts exceptional growth areas for both debt management and moneyshare cards for migrant workers by 2012.

The average debt accrued by those signing up for IVAs reached £47,000 in August and is expected to grow as the credit crunch continues. Prepaid cards do not allow credit options and once funds on the cards are spent the card must be topped up before using it again. These measures offer customers in IVAs a very real opportunity to manage their finances. While this card use accounts for only 1% of all cards used by Newcastle Building Society Card Solutions at present, the Society predicts this area will grow to 10% of the market as a whole by 2012.

The use of prepaid cards among migrant workers without access to a UK bank account has also seen particular growth, offering a cost efficient option to share money with family back home. These workers form part of the 6.5 million ‘unbanked' consumer population within the UK and Newcastle Building Society Card Solutions currently has 10 card schemes of this nature in circulation. This card use accounts for 3% all cards used by Newcastle Building Society Card Solutions at present and the Society predicts this area will grow to 10% of the market as a whole by 2012.

Kriya Patel, Head of Card Solutions at Newcastle Building Society, commented; "The popularity of prepaid cards over the last couple of years is astounding. Newcastle Building Society Card Solutions has been an issuing bank for these card schemes since 2005 and the number and diversity of the schemes available increases each month. We have currently issued 2.3million cards across the UK and within Europe and have launched 100 schemes to date.

"As one of the premier providers of MasterCard prepaid cards in Europe, we have witnessed first hand the potential for these cards among widely differing populations. Without credit options and ties to bank accounts, these cards offer real solutions to a vast number of Britons and are in a very strong position to aid debt management across the country.

"The safety offered by the cards is also appealing within the teen, travel and online community, protecting access to people's money and identity. Prepaid cards are now seen by many as the next logical step toward a cashless society and the flexibility and opportunity these cards offer certain sectors of the population is undeniable."