616cardMillions of people are turning to prepaid debit cards as credit card companies increase fees to offset federal regulations.

In the past five years, prepaid cards have become the fastest growing payment method in the United States. Just this week, American Express became the first mainstream financial company to offer a prepaid card.

But although the cards cut out banks, they have problems of their own: complex fee schedules, no protection to limit losses for fraudulent charges, and no ability to build credit.

Still, Americans spent $140 billion using prepaid cards in 2009, according to the Federal Reserve. That was an average increase of 21.5 percent each year since 2005. The Mercator Advisory Group, a research firm, expects consumers to load $552 billion in 2012, an increase from $330 million three years ago.

Sold through retailers such as Walmart, the prepaid cards have caught on because they can be used wherever bank-issued debit cards are accepted.

Not only do the cards cater to frustrated former bank customers, but they also target people who don’t have a bank account. Nearly one in five Americans do not have a bank account, a 2009 government report found, and the number is growing.

Card issuers make money in two ways. They charge fees to customers to activate, reload, and maintain the cards. Merchants also pay fees whenever customers swipe their cards. Fees charged to customers represent 21.6 percent of revenues for Green Dot Corp, the largest prepaid card company.

Although federal regulation contributed to the rise of prepaid debit cards, the Consumer Financial Protection Bureau—part of Congress’ Wall Street reform bill—plans oversight of the industry when the bureau launches in July.

The Associated Press contributed to this report.