PreCash Inc., a Houston-based marketer and provider of prepaid cards, has signed an agreement with Green Dot Corp., expanding PreCash's reload locations nationwide.

But PreCash considers card reloading through retailer locations as secondary to its strategy of persuading cardholders to directly deposit their paychecks and government funds into their card accounts.

When cardholders have their pay and government funds deposited directly into their PreCash card accounts, they tend to keep their cards five to 10 times longer than nonreloadable prepaid cards, Mia Mends, PreCash vice president of prepaid debit products, tells ATM&Debit News.

Moreover, consumers who directly deposit funds into reloadable card accounts keep the cards for an average of 18 months compared with an average of six months for those who do not, according to industry observers.

"People who download money onto the card are an absolute value because they stay with you longer," Mends says.

PreCash uses television commercials the company began airing in late July to encourage consumers to download funds to their Visa-branded Vision Premier prepaid card accounts. Visa Inc. aired television advertising campaigns  on cable television in 2007 and 2008 to drive consumer awareness about prepaid cards, Kate Mulhearn, a Visa spokesperson, wrote in an e-mail message to ATM&Debit News.
PreCash borrowed the idea from Visa and developed a television to fit it owns needs. It is still too early to determine the effectiveness of PreCash's television commercials, Mends says.

The commercials point viewers to PreCash's Web site and to a toll-free telephone number.

When individuals call, it provides PreCash's call-center operators an opportunity to "educate" them about the card and the benefits of direct deposit, Mends says. "That is our primary message," she says. Bancorp Inc., a Wilmington, Del.-based bank that bills itself as one of the nation's five largest issuers of open-loop prepaid cards, issues Vision Premier for PreCash, Mends says.

Mends contends it is much less of a hassle to have the payroll funds directly deposited to a card account instead of the cardholder collecting his paycheck, cashing it and then going to merchant location to load the funds.
PreCash is not a trailblazer in this area; the company's strategy is part of a trend that began years ago.

The federal government, for example,  encourages direct deposits of government entitlements such as unemployment compensation and Social Security benefits into card accounts, and that has proven to be beneficial during disasters, such as Hurricane Katrina in 2005, when physical locations to deposit funds might become unavailable, says Adil Moussa, an analyst with Aite Group LLC, a Boston-based consulting firm.
Tax-preparation companies, including H&R Block, Jackson Hewitt and Liberty Tax services, also encourage customers to have their tax refunds directly deposited into prepaid card accounts.

The companies want holders of their cards to deposit their paychecks and other funds directly into their card accounts throughout the year to help create long-term customers.
"If you get people to download their paychecks to the cards on a weekly, biweekly or monthly schedule, they will have more use for the card," Moussa says.
PreCash charges a $9.95  activation fee for  the Visa Vision Premier card. The company does not charge consumers a reload fee if they use direct deposit, PreCash's own   retail reload network or PayPal.Otherwise, PreCash charges 95 cents for each reload.

Direct deposit cardholders who select signature transactions instead of PIN transactions at the point of sale can use the card without incurring any fees, the company says.

Cardholders also can withdraw cash from participating Visa banks for free, PreCash says. The company also says it makes money off of interchange, which  is paid  to Bancorp, the card issuer. The statement implies Bancorp shares interchange with PreCash, a spokesperson says. Interchange is a lucrative source of revenue for prepaid card marketers, Moussa says. "Prepaid card marketers receive 1.2% of every transaction," he says.

Although PreCash's primary strategy is to encourage consumers to deposit funds directly into their prepaid card accounts, PreCash has not closed the door to other methods.

 The company's agreement with Green Dot expands PreCash's reload locations by 50,000, the company says. PreCash also has reload-network agreements with Visa ReadyLink, Western Union and MoneyGram, giving its cardholders more than 150,000 merchant locations where they can reload their card accounts, the company says. ATM

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