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Hybrid cards are among the latest payments innovations that target low-income consumers and individuals who need a few extra dollars to meet their financial obligations until payday, says Ken Paterson, director of the Credit Advisory Service at Mercator Advisory Group. The network-branded cards are called hybrid cards because they are prepaid products that include a line of credit, usually less than $1,000, says Paterson, principal author of Mercator's 30-page report "The Rise of Hybrid Credit/Prepaid Cards." "There always has been a need out there for short-term loans, and there always has been a question as to how best to serve them," Paterson says. "The hybrid card combines a short-term loan with the convenience of a prepaid card that can be used at the point of sale." H&R Block Inc., which issues the MasterCard-branded H&R Block Prepaid Emerald Card, enables its customers to have their federal and state income tax refunds downloaded into their Emerald card accounts. In addition, cardholders can take advantage of Emerald Advance, which is a line of credit H&R Block offers Emerald prepaid cardholders, Nancy Mays, an H&R Block spokesperson, tells ATM&Debit News, a CardLine sister publication. H&R Block charges a 36% annual interest rate on the loan. The high interest rate, however, has not deterred the company's customers from taking advantage of the line of credit. Last year, H&R Block issued 887,000 Emerald Advance lines of credit, Paterson says. Emerald cardholders can cut the interest rate on the loan to 9% by opening a deposit account with H&R Block Bank.  Meta Payment Systems, which is owned by MetaBank of Storm Lake, Iowa, is another hybrid card issuer. Both companies began offering lines of credit to prepaid cards last year. MetaBank, whose product is called iAdvance, provides lines of credit to its partners, which includes tax-preparation company Jackson Hewitt Inc. Jackson Hewitt issues iPower, a Visa-branded prepaid card. An iPower cardholder can borrow money from iAdvance in increments of $20. No late fees apply, but the annual interest rate on unpaid balances is a whopping 150%, Paterson says. Cardholders also have to request a credit advance either online or over the telephone, says Nicole Pullman, a MetaBank spokesperson.

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