Banks Pin Revenue Hopes on Prepaid Cards

December 6, 2010  |  

(Wall Street Journal) — Big banks may soon start pushing a different type of plastic to their customers.  Financial institutions such as U.S. Bancorp, Wells Fargo & Co. and Bank of America Corp. are exploring prepaid cards as a way to make up revenue that will likely be lost from federal restrictions on debit cards. That is because prepaid cards, which are preloaded with funds and used like debit cards, are exempt from restrictions in the Dodd-Frank financial-overhaul bill.  The law, enacted earlier this year, is expected to reduce significantly the transaction fees that banks collect from merchants with each swipe of a debit card, known as interchange fees. The Federal Reserve hasn’t yet provided details on the new debit-card restrictions, but a survey released by CardHub.com last month estimated banks could lose as much as $9 billion of the $22.8 billion collected each year in interchange fees.

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