Let’s prepay big time.
Credit card issuers have reduced lines of credit by $1Trillion in the past 12 months. At least this is one less credit bubble to worry about. More accurately, I should put my words in a slightly different order: this is one credit bubble to worry less about. There are still plenty of credit card holders in deep trouble.
Things may actually be starting to change at a much deeper level in the minds and habits of the American consumer.
When I started working with payment cards in the US in 1995, I was told in no uncertain terms that people would never “pay before”, which is what prepaid cards are about, when they had the choice to “pay after” which is the convenience offered by credit cards.
According to the Mercator Advisory Group, the “open loop” or “network branded” prepaid cards are expected to grow at a compounded annual growth rate of 48% until 2012. They are the cards with Visa, MasterCard, American Express or Discover logos, that can be used anywhere debit cards are accepted.
Mercator US Prepaid Forecasts To 2012
They will surpass “closed loop” or “merchant branded” prepaid cards, which are mostly the gift cards that you find on j-hooks around every aisle corner of your supermarket.
This means that prepaid cards will literally be everywhere. It is fundamentally a good sign: American consumers will keep spending, but without the debt that comes with credit cards.
