Research has indicated that during summer this year, the total value of consumer debt amassed to around £1.44 trillion. Newcastle Building Society Card Solutions - which is a premier provider of MasterCard prepaid cards in both the UK and around Europe - believes that the growth of prepaid card usage will increase by 10 per cent by 2012, by people who have individual voluntary arrangements (IVA).

Prepaid cards - the plastic of the future?

By autumn 2009 the number of prepaid cards issued in the UK will increase to 10.8 million and the value that will be spent on these cards will be around £697 million. Newcastle Building Society Card Solutions now predicts that the prepaid card market will grow by a large margin over the next four years. Moreover the firm, which also has 500,000 cards that are in regular use on a monthly basis stated that this card usage account only for one per cent of all those that are used with the firm. In addition the company believes that the usage of prepaid cards will increase to around 10 per cent of all the card usage in the market. The firm also predicts that debt management and “moneyshare” cards for migrant workers will expand in the near future.

The average debt values, of IVA holders was said to be around £47,000 in August and due to the credit crunch, this figure is expected to rise. Prepaid cards, do not provide the option of “buy now pay later” that credit cards do; they are topped up with money, which can be spent over time and when the value has run out, the card can then be topped up again. This format can provide customers with IVA’s, a greater opportunity to organise their spending and finances.

Migrant workers

There has also been a noted increase in the number of migrant workers, taking on prepaid cards, as this provides them with the chance of saving money, without having to open up a back account. This option, has also given such workers a chance to share money with their families back home. The total figure for these workers is said to be around 6.5 million people, considered the ‘unbanked’ working population within the UK.

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 firsthand 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.”

She concluded: "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."