THE WALL STREET JOURNAL

BY APARAJITA SAHA-BUBNA

Credit cards are so 2006. Today the fast-growing way for consumers to pay is the prepaid card.

This kind of plastic, traditionally a bastion of gift cards, is also being used by federal and state governments to pay out benefits, and by companies to pay their employees.

Use of prepaid cards has also risen with the economic slump, as budget-conscious consumers shun debt. Companies including MasterCard Inc., Visa Inc., J.P. Morgan Chase & Co., Bank of America Corp., Citigroup Inc., Discover Financial Services Inc. and American Express Co., are plowing millions in investments into this area.

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Ryan Carlson (WashCard Systems):

This is a trend that we have been tracking for close to 22 months now and both laundromats and car washes with our solution have seen a huge rise in the use of the prepaid cards that spend money JUST like a credit card, but they are instead prepaid. The wild thing is that it is lower-income demographics that carry these cards since it is the only way to make online purchases, pay for many services these days, and secure prepaid phone minutes over the telephone without making a trip into a special store.

Now that more people that are not credit worthy are being turned away from getting a traditional credit card it should be no surprise that prepaid cards are on the rise. Why? Because our society is becoming GEARED to appeal to card-carrying consumers and a little credit crunch won't be slowing things down.

I was in line at a popular sub-sandwich chain the other day at the mall while doing my holiday shopping and there was two lines. I chose the shortest line that was 12 people deep, the other line had 17 people. The line with 17 people PLUS an additional 3 people got their orders processed before me because they ALL paid with credit cards. My line of 12 people was slowed up by TWO cash-paying customers. Is it any wonder why businesses want to promote payment by card? Faster through-put. Whether you are in the business of turning loads of laundry, washing cars, or selling sandwiches it's all about throughput and maximizing dollar per ticket. Would it also surprise you that of the 22 customers that paid by credit card 19 of them bought the full "meal" with chips and a drink, whereas the two cash paying customers only got the sandwich...