Source: Danielle Douglas, Washington Post ( Free Registration )

American Express announced Tuesday that its prepaid debit cards will now be backed by the Federal Deposit Insurance Corp., the latest indication that a market once shunned by established financial institutions is gaining ground.

The use of reloadable prepaid cards has exploded in the wake of the credit crisis that left millions of Americans outside the traditional banking system. But reloadable prepaid cards do not offer the same financial protections for consumers as checking accounts. They also operate with fewer regulatory constraints.

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