Prepaid cards are used by many consumers as an alternative to regular credit cards. Some consumers use them because they cannot get approved for a credit card due to debt or credit history, others simply prefer them over other forms of paying. In fact, according to a report from the Pew Charitable Trusts, about 23 million people use prepaid cards regularly.
Prepaid cards have gained attention over the last few weeks as a resolution was filed in Congress to roll back rules drafted by the Consumer Financial Protectio
n Bureau (CFPB) slated to go into effect later this year. The rules aimed to provide similar safeguards governing debit and credit cards to prepaid cards. These measures include fee disclosures, fraud protections, and limits on overdraft fees. Consumers also need to comply with the ability to repay.
Proponents of the CFPB rule state that consumers should have the same protections afforded to users of credit and debit cards. Opponents claim the rules are too broad and would be costly for the payments industry to comply with, a cost the opponents say would be passed onto consumers.
While the debate over the CFPB’s prepaid card rule continues, experts say consumers who use prepaid cards should remember these tips:
- Shop around. The payments industry has developed a variety of prepaid cards marketed to different lifestyles. Research your options and use the card best for you.
- Know the fees and costs of different prepaid cards. These fees can include fees for withdrawing money, for loading money onto the card, for calling customer services, or for not using the card enough.
- Avoid using the card anyplace a “temporary hold” may be issued. Gas stations and hotels typically will place a temporary hold of a charge higher than what you spent while the purchase processes. The temporary hold ensures there is enough money on the card for the purchase, but the hold could affect your ability to make a payment elsewhere.
- Prepaid cards may not be accepted everywhere. Some merchants, particularly those in the service industry, prohibit payments using prepaid cards.
- Know what happens if your card gets lost or stolen. Your ability to recover your money can vary from card to card.
For more information on prepaid cards, visit the CFPB’s website.
If you have additional questions, contact the Office of Consumer Affairs and Business Regulation by calling our Consumer Hotline at (617) 973-8787, or toll-free in MA at (888) 283-3757, Monday through Friday, from 9 am-4:30 pm. Follow the Office on Facebook and Twitter, @Mass_Consumer. The Baker-Polito Administration’s Office of Consumer Affairs and Business Regulation along with its five agencies work together to achieve two goals: to protect and empower consumers through advocacy and education, and to ensure a fair playing field for all Massachusetts businesses. The Office also oversees the state’s Lemon Laws, data breach reporting, Home Improvement Contractor Program and the state’s Do Not Call Registry.
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