Get Ready for More Confusion in the CheckOut Lane Between Prepaid Cards & Gift Cards

rush cardWhen you want to take your prepaid card offering to the next level, who do you call?  Well, either a celebrity, American Express, or GreenDot, and since the RushCard already has the backing of hip hop mogul Russell Simmons and Amex recently teamed up with Walmart, it’s the latter that got the nod.

But the good folks over at UniRush, the company that offers the RushCard, haven’t partnered with GreenDot in order to leverage the company’s expertise – the GreenDot Gold Card has long been one of the best prepaid cards on the market – to revamp one of their existing prepaid card plans or even develop a new offer.  No, they’ve done so to tap into the company’s extensive distribution network in order to improve the RushCard’s retail presence.

In return for a cut of the sales, GreenDot will serve as the exclusive issuer of the retail version of the RushCard and also enable its sale at certain GreenDot retail partners, which include the likes of Target, Wal-Mart, and 7-Eleven.  The move simultaneously underscores the decline of GreenDot’s exclusive hold on the retail prepaid card market and the importance of consumers doing their homework prior to signing up for a financial product.

Just a few years ago GreenDot was a big fish in a relatively small pond, but the cap on debit card swipe fees and various other factors led their popularity to increase rapidly and brought more competition into the industry.  If current projections hold true, consumers will load 200% more money onto prepaid cards in 2013 than they did in 2010, and it seems like the prognosticators are forecasting a smaller percentage of the annual load to involve GreenDot cards.  In late July, the price of GreenDot stock fell 60% in a single day after the company was forced to decrease its projected annual revenue by 9%.  Following the Oct. launch of the Bluebird Prepaid Card from American Express and Walmart, it has fallen nearly another 25% as well.

“The big problem Green Dot has is that their retail partners that were previously exclusive are now putting other cards on the shelf,” Gil B. Luria, an analyst for the research firm Wedbush Securities said. “I would say they need to find new channels to make up for the lost shelf space in their existing retail channel.”

The RushCard deal is an example of them doing just that.  And while it could easily help GreenDot right the ship financially, the benefit for consumers is much more dubious.

The way prepaid cards are displayed in retail locations often makes them indistinguishable from gift cards, which can easily confuse people.  Unlike gift cards, prepaid cards are not intended to be given to third parties and often come ripe with fees, which can result in an unassuming consumer receiving an unexpected bill.  What’s more, a consumer could easily assume that one prepaid card is as good as any other and that the amount you load determines how much value you get out of it.  Unfortunately, if you’re getting a prepaid card for ongoing use, picking the wrong one can end up costing you more than $300 over the course of a year.

The point is a prepaid card is not a pack of gum, a candy bar, or even a gift card.  It’s not the kind of thing you should buy on impulse at the check-out counter.  It is a financial product that should be chosen with care and with a specific intended use in mind, and consumers should remember that when more and more of them make their way into stores around the country.

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