A 2009 study conducted by Bretton Woods, Inc., a management advisory firm, found that for the average checking account holder who maintains a low balance, prepaid debit cards are actually a cheaper option to a traditional checking account. The study compared the fees and costs of four of the major prepaid debit programs within the industry: Wal-Mart Stores Inc., Green Dot, Net Spend and Account Now.

The study assumed that low balance checking account holders have an average of six overdraft fees annually. Overdraft fees, which occur when you use your traditional bank account linked debit card or write a check when you do not have sufficient funds in your account, can total upwards of $25 per fee. Assuming these overdrafts, and factoring in other banking fees, the study concluded that low balance checking account holders would pay between $200 and $350 annually for a traditional checking account.

If these consumers had instead used one of the four major prepaid debit card programs considered in the study, their fees would have been much lower, at between $108 and $320 annually. Chief Executive Michael Flores of Bretton Woods Inc. stated that the four major card providers in the study have a significant market share within the prepaid industry.

This study suggests that prepaid debit may provide a cost effective alternative for consumers during hard financial times. The prepaid debit industry is growing, and the growth is partially fueled by the high cost of traditional bank accounts, which even modifications to overdraft fees may not offset.

Prepaid cards, in some situations, may also be an alternative to check cashing stores. In a related note, check out Check Cashing 101: Why are Check Cashing Stores Needed to learn more about why check cashing stores are so popular.