by Alison Storm | 08/13/10

Whether you're a teenager learning about personal finance or an adult without a bank account, prepaid debit cards can fill a void. Companies like California-based Green Dot Corp. sell branded debit cards through stores like Wal-mart or Walgreens and they're in high demand. The credit crisis has made getting your hands on plastic tougher for subprime clients, so many are now turning to prepaid debit cards. "They are some of our best customers," Green Dot Chief Executive Steve Streit said of the subprime population to the Wall Street Journal.

Prepaid debit cards are a product that mainstream credit card companies like JP Morgan Chase & Co, Bank of America and Citigroup don't offer. Experts believe prepaid debit cards will be used for $200 billion worth of purchases by 2013. They're convenient because they can be purchased in a variety of stores and immediately loaded with funds. Shoppers can use them to buy pretty much anything, just like a debit card issued by a bank. And unlike traditional credit cards, users don't have to worry about racking up debt.

Green Dot currently has about 3.4 million users, and each are charged small upkeep fees. Half of their customers don't have bank accounts. "It's a very important service that many didn't have access to in the past," Wedbush analyst Gil Luria told the Wall Street Journal. "And the category will grow very quickly." Part of that growth is because many people are facing plunging credit scores. Almost one in three Americans have a credit score under 650-- that means they won't qualify for anything except for subprime credit cards. "It is the first significant downward score change in the time FICO scores have been available [to the public]," Credit.com's credit score and report expert John Ulzheimer told the Wall Street Journal. Ulzheimer believes this group of Americans with low credit scores will only grow and so will profits for companies like Green Dot. "This is where the next generation of credit-card users is going to come from," Ulzheimer said. "They fill a need in that this is a segment of the population that is growing."