Creditnet News Story
Prepaid cards may help profits at Visa, MasterCard
Friday, March 5, 2010
By William Davis
Could also boost bottom line of other companies.
According to a recent report, things like prepaid credit cards may lead to higher profitability for Visa and MasterCard over the next two years.
Citing David Long, an analyst at William Blair & Co., the Associated Press said that the two companies could benefit in 2010 and 2011 because of the increased use of prepaid cards. Other companies - such as American Express, Discover and Capital One - may also see a boost in profits because of the products.
"Industry analysts expect the prepaid market to grow 22 percent a year over the next three years," the AP said.
Prepaid cards work by having users deposit an amount of money onto them. That amount acts as the ceiling for how much users can spend with the cards. Once the cards are emptied of funds, users can recharge them with more money.
The AP, and other experts, noted that these types of cards are popular with parents because of the limit imposed on the accounts. This not only allows parents to teach children about spending, but also ensures they do not get into trouble by charging more than they can afford.
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